Correlation Between Verizon Communications and Petro Viking

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

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

Diversification Opportunities for Verizon Communications and Petro Viking

-0.39

Correlation Coefficient

Verizon Communications  Petro Viking

Very good diversification

The 3 months correlation between Verizon and Petro is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Petro Viking Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Viking Energy 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 Petro Viking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Viking Energy has no effect on the direction of Verizon Communications i.e., Verizon Communications and Petro Viking go up and down completely randomly.

Pair Corralation between Verizon Communications and Petro Viking

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 44.31 times less return on investment than Petro Viking. But when comparing it to its historical volatility, Verizon Communications is 44.4 times less risky than Petro Viking. It trades about 0.17 of its potential returns per unit of risk. Petro Viking Energy is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Petro Viking Energy on December 28, 2024 and sell it today you would earn a total of  0.26  from holding Petro Viking Energy or generate 260.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Verizon Communications  vs.  Petro Viking Energy

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.

Petro Viking Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Petro Viking Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Petro Viking reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verizon Communications and Petro Viking

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

The idea behind Verizon Communications and Petro Viking Energy 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.