Correlation Between Verizon Communications and IShares Morningstar

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

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

Diversification Opportunities for Verizon Communications and IShares Morningstar

0.71

Correlation Coefficient

Verizon Communications  IShares Morningstar

Poor diversification

The 3 months correlation between Verizon and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and iShares Morningstar Multi Asse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar 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 IShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar has no effect on the direction of Verizon Communications i.e., Verizon Communications and IShares Morningstar go up and down completely randomly.

Pair Corralation between Verizon Communications and IShares Morningstar

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 3.26 times more return on investment than IShares Morningstar. However, Verizon Communications is 3.26 times more volatile than iShares Morningstar Multi Asset. It trades about 0.02 of its potential returns per unit of risk. iShares Morningstar Multi Asset is currently generating about 0.05 per unit of risk. If you would invest  3,549  in Verizon Communications on October 11, 2024 and sell it today you would earn a total of  345.00  from holding Verizon Communications or generate 9.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Verizon Communications  vs.  iShares Morningstar Multi Asse

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.

iShares Morningstar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Morningstar Multi Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, IShares Morningstar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Verizon Communications and IShares Morningstar

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

The idea behind Verizon Communications and iShares Morningstar Multi Asset 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.