Correlation Between Verizon Communications and ATCO

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

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

Diversification Opportunities for Verizon Communications and ATCO

0.48

Correlation Coefficient

Verizon Communications  ATCO

Very weak diversification

The 3 months correlation between Verizon and ATCO is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications CDR and ATCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATCO 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 CDR are associated (or correlated) with ATCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATCO has no effect on the direction of Verizon Communications i.e., Verizon Communications and ATCO go up and down completely randomly.

Pair Corralation between Verizon Communications and ATCO

Assuming the 90 days trading horizon Verizon Communications CDR is expected to generate 1.82 times more return on investment than ATCO. However, Verizon Communications is 1.82 times more volatile than ATCO. It trades about 0.14 of its potential returns per unit of risk. ATCO is currently generating about 0.04 per unit of risk. If you would invest  1,701  in Verizon Communications CDR on December 30, 2024 and sell it today you would earn a total of  259.00  from holding Verizon Communications CDR or generate 15.23% return on investment over 90 days.

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

Verizon Communications CDR  vs.  ATCO

Verizon Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications CDR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Verizon Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

ATCO

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ATCO are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ATCO is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Verizon Communications and ATCO

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

The idea behind Verizon Communications CDR and ATCO 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.