Correlation Between Verizon Communications and ProShares UltraShort

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

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

Diversification Opportunities for Verizon Communications and ProShares UltraShort

-0.68

Correlation Coefficient

Verizon Communications  ProShares UltraShort

Excellent diversification

The 3 months correlation between Verizon and ProShares is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and ProShares UltraShort Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort Real 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 ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort Real has no effect on the direction of Verizon Communications i.e., Verizon Communications and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Verizon Communications and ProShares UltraShort

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.7 times more return on investment than ProShares UltraShort. However, Verizon Communications is 1.43 times less risky than ProShares UltraShort. It trades about 0.07 of its potential returns per unit of risk. ProShares UltraShort Real is currently generating about 0.05 per unit of risk. If you would invest  4,165  in Verizon Communications on September 16, 2024 and sell it today you would earn a total of  63.00  from holding Verizon Communications or generate 1.51% 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.  ProShares UltraShort Real

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.

ProShares UltraShort Real

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Real are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Verizon Communications and ProShares UltraShort

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

The idea behind Verizon Communications and ProShares UltraShort Real 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.