Correlation Between Verizon Communications and CanSino Biologics

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

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

Diversification Opportunities for Verizon Communications and CanSino Biologics

-0.28

Correlation Coefficient

Verizon Communications  CanSino Biologics

Very good diversification

The 3 months correlation between Verizon and CanSino is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and CanSino Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CanSino Biologics 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 CanSino Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CanSino Biologics has no effect on the direction of Verizon Communications i.e., Verizon Communications and CanSino Biologics go up and down completely randomly.

Pair Corralation between Verizon Communications and CanSino Biologics

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.32 times more return on investment than CanSino Biologics. However, Verizon Communications is 3.09 times less risky than CanSino Biologics. It trades about 0.02 of its potential returns per unit of risk. CanSino Biologics is currently generating about -0.02 per unit of risk. If you would invest  3,554  in Verizon Communications on October 10, 2024 and sell it today you would earn a total of  338.00  from holding Verizon Communications or generate 9.51% return on investment over 90 days.

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

Verizon Communications  vs.  CanSino Biologics

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.

CanSino Biologics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CanSino Biologics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, CanSino Biologics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verizon Communications and CanSino Biologics

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

The idea behind Verizon Communications and CanSino Biologics 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.