Correlation Between Verizon Communications and Intel

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

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

Diversification Opportunities for Verizon Communications and Intel

0.61

Correlation Coefficient

Verizon Communications  Intel

Poor diversification

The 3 months correlation between Verizon and Intel is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of Verizon Communications i.e., Verizon Communications and Intel go up and down completely randomly.

Pair Corralation between Verizon Communications and Intel

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 1.5 times less return on investment than Intel. But when comparing it to its historical volatility, Verizon Communications is 2.84 times less risky than Intel. It trades about 0.17 of its potential returns per unit of risk. Intel is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,982  in Intel on December 28, 2024 and sell it today you would earn a total of  380.00  from holding Intel or generate 19.17% return on investment over 90 days.

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

Verizon Communications  vs.  Intel

Verizon Communications

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Verizon Communications showed solid returns over the last few months and may actually be approaching a breakup point.

Intel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Intel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verizon Communications and Intel

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

The idea behind Verizon Communications and Intel 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.