Correlation Between Verizon Communications and Promotora

Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Promotora at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Verizon Communications and Promotora into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Verizon Communications and Promotora y Operadora, you can compare the effects of market volatilities on Verizon Communications and Promotora and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Verizon Communications with a short position of Promotora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Promotora.

Diversification Opportunities for Verizon Communications and Promotora

0.29

Correlation Coefficient

Verizon Communications  Promotora

Modest diversification

The 3 months correlation between Verizon and Promotora is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Promotora y Operadora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Promotora y Operadora and Verizon Communications is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Verizon Communications are associated (or correlated) with Promotora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Promotora y Operadora has no effect on the direction of Verizon Communications i.e., Verizon Communications and Promotora go up and down completely randomly.

Pair Corralation between Verizon Communications and Promotora

Assuming the 90 days horizon Verizon Communications is expected to generate 0.74 times more return on investment than Promotora. However, Verizon Communications is 1.35 times less risky than Promotora. It trades about 0.43 of its potential returns per unit of risk. Promotora y Operadora is currently generating about 0.15 per unit of risk. If you would invest  81,500  in Verizon Communications on December 4, 2024 and sell it today you would earn a total of  8,750  from holding Verizon Communications or generate 10.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Verizon Communications  vs.  Promotora y Operadora

Verizon Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Verizon Communications is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Promotora y Operadora

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Promotora y Operadora are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Promotora disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verizon Communications and Promotora

The main advantage of trading using opposite Verizon Communications and Promotora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Promotora can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Promotora will offset losses from the drop in Promotora's long position.

The idea behind Verizon Communications and Promotora y Operadora pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.