Correlation Between Verizon Communications and REX FANG

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

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

Diversification Opportunities for Verizon Communications and REX FANG

-0.62

Correlation Coefficient

Verizon Communications  REX FANG

Excellent diversification

The 3 months correlation between Verizon and REX is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and REX FANG Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX FANG Innovation 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 REX FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX FANG Innovation has no effect on the direction of Verizon Communications i.e., Verizon Communications and REX FANG go up and down completely randomly.

Pair Corralation between Verizon Communications and REX FANG

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 1.04 times more return on investment than REX FANG. However, Verizon Communications is 1.04 times more volatile than REX FANG Innovation. It trades about 0.13 of its potential returns per unit of risk. REX FANG Innovation is currently generating about -0.1 per unit of risk. If you would invest  3,952  in Verizon Communications on December 18, 2024 and sell it today you would earn a total of  471.00  from holding Verizon Communications or generate 11.92% return on investment over 90 days.

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

Verizon Communications  vs.  REX FANG Innovation

Verizon Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

REX FANG Innovation

Risk-Adjusted Performance

Very Weak

Over the last 90 days REX FANG Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Verizon Communications and REX FANG

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

The idea behind Verizon Communications and REX FANG Innovation 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.