Correlation Between Verizon Communications and Benchmark Bankshares

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

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

Diversification Opportunities for Verizon Communications and Benchmark Bankshares

-0.56

Correlation Coefficient

Verizon Communications  Benchmark Bankshares

Excellent diversification

The 3 months correlation between Verizon and Benchmark is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Benchmark Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Bankshares 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 Benchmark Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Bankshares has no effect on the direction of Verizon Communications i.e., Verizon Communications and Benchmark Bankshares go up and down completely randomly.

Pair Corralation between Verizon Communications and Benchmark Bankshares

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.72 times more return on investment than Benchmark Bankshares. However, Verizon Communications is 1.39 times less risky than Benchmark Bankshares. It trades about 0.04 of its potential returns per unit of risk. Benchmark Bankshares is currently generating about 0.03 per unit of risk. If you would invest  3,288  in Verizon Communications on October 5, 2024 and sell it today you would earn a total of  733.00  from holding Verizon Communications or generate 22.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.81%
Values	Daily Returns

Verizon Communications  vs.  Benchmark Bankshares

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.

Benchmark Bankshares

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Bankshares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, Benchmark Bankshares displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verizon Communications and Benchmark Bankshares

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

The idea behind Verizon Communications and Benchmark Bankshares 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.