Correlation Between Verizon Communications and Value Grupo

Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Value Grupo 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 Value Grupo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Verizon Communications and Value Grupo Financiero, you can compare the effects of market volatilities on Verizon Communications and Value Grupo 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 Value Grupo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Value Grupo.

Diversification Opportunities for Verizon Communications and Value Grupo

-0.65

Correlation Coefficient

Verizon Communications  Value Grupo

Excellent diversification

The 3 months correlation between Verizon and Value is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Value Grupo Financiero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Grupo Financiero 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 Value Grupo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Grupo Financiero has no effect on the direction of Verizon Communications i.e., Verizon Communications and Value Grupo go up and down completely randomly.

Pair Corralation between Verizon Communications and Value Grupo

Assuming the 90 days horizon Verizon Communications is expected to generate 7.55 times less return on investment than Value Grupo. But when comparing it to its historical volatility, Verizon Communications is 2.25 times less risky than Value Grupo. It trades about 0.07 of its potential returns per unit of risk. Value Grupo Financiero is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  9,304  in Value Grupo Financiero on October 24, 2024 and sell it today you would earn a total of  1,396  from holding Value Grupo Financiero or generate 15.0% return on investment over 90 days.

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

Verizon Communications  vs.  Value Grupo Financiero

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Value Grupo Financiero

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Grupo Financiero are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Value Grupo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verizon Communications and Value Grupo

The main advantage of trading using opposite Verizon Communications and Value Grupo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Value Grupo 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 Value Grupo will offset losses from the drop in Value Grupo's long position.

The idea behind Verizon Communications and Value Grupo Financiero 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.