Correlation Between Verizon Communications and Appleseed Fund

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

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

Diversification Opportunities for Verizon Communications and Appleseed Fund

0.64

Correlation Coefficient

Verizon Communications  Appleseed Fund

Poor diversification

The 3 months correlation between Verizon and Appleseed is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Appleseed Fund Appleseed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appleseed Fund Appleseed 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 Appleseed Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appleseed Fund Appleseed has no effect on the direction of Verizon Communications i.e., Verizon Communications and Appleseed Fund go up and down completely randomly.

Pair Corralation between Verizon Communications and Appleseed Fund

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Appleseed Fund. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.52 times less risky than Appleseed Fund. The stock trades about -0.42 of its potential returns per unit of risk. The Appleseed Fund Appleseed is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest  1,548  in Appleseed Fund Appleseed on October 10, 2024 and sell it today you would lose (125.00) from holding Appleseed Fund Appleseed or give up 8.07% of portfolio value over 90 days.

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

Verizon Communications  vs.  Appleseed Fund Appleseed

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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Appleseed Fund Appleseed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Verizon Communications and Appleseed Fund

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

The idea behind Verizon Communications and Appleseed Fund Appleseed 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.