Correlation Between Verizon Communications and A W

Can any of the company-specific risk be diversified away by investing in both Verizon Communications and A W 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 A W 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 A W FOOD, you can compare the effects of market volatilities on Verizon Communications and A W 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 A W. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and A W.

Diversification Opportunities for Verizon Communications and A W

-0.5

Correlation Coefficient

Verizon Communications  A W

Very good diversification

The 3 months correlation between Verizon and A W is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications CDR and A W FOOD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A W FOOD 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 A W. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A W FOOD has no effect on the direction of Verizon Communications i.e., Verizon Communications and A W go up and down completely randomly.

Pair Corralation between Verizon Communications and A W

Assuming the 90 days trading horizon Verizon Communications CDR is expected to generate 1.07 times more return on investment than A W. However, Verizon Communications is 1.07 times more volatile than A W FOOD. It trades about 0.14 of its potential returns per unit of risk. A W FOOD is currently generating about -0.07 per unit of risk. If you would invest  1,701  in Verizon Communications CDR on December 29, 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Verizon Communications CDR  vs.  A W FOOD

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.

A W FOOD

Risk-Adjusted Performance

Very Weak

Over the last 90 days A W FOOD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Verizon Communications and A W

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

The idea behind Verizon Communications CDR and A W FOOD 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.