Correlation Between Verizon Communications and Fidelity Covington

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

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

Diversification Opportunities for Verizon Communications and Fidelity Covington

-0.35

Correlation Coefficient

Verizon Communications  Fidelity Covington

Very good diversification

The 3 months correlation between Verizon and Fidelity is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust 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 Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of Verizon Communications i.e., Verizon Communications and Fidelity Covington go up and down completely randomly.

Pair Corralation between Verizon Communications and Fidelity Covington

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Fidelity Covington. In addition to that, Verizon Communications is 1.45 times more volatile than Fidelity Covington Trust. It trades about -0.05 of its total potential returns per unit of risk. Fidelity Covington Trust is currently generating about 0.12 per unit of volatility. If you would invest  3,015  in Fidelity Covington Trust on September 16, 2024 and sell it today you would earn a total of  195.00  from holding Fidelity Covington Trust or generate 6.47% 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.  Fidelity Covington Trust

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 fairly strong basic indicators, Verizon Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Covington Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fidelity Covington is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Verizon Communications and Fidelity Covington

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

The idea behind Verizon Communications and Fidelity Covington Trust 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.