Correlation Between Verizon Communications and Scientific

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

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

Diversification Opportunities for Verizon Communications and Scientific

0.5

Correlation Coefficient

Verizon Communications  Scientific

Very weak diversification

The 3 months correlation between Verizon and Scientific is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Scientific Games International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games Int 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 Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Games Int has no effect on the direction of Verizon Communications i.e., Verizon Communications and Scientific go up and down completely randomly.

Pair Corralation between Verizon Communications and Scientific

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 82.71 times less return on investment than Scientific. But when comparing it to its historical volatility, Verizon Communications is 34.47 times less risky than Scientific. It trades about 0.02 of its potential returns per unit of risk. Scientific Games International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,020  in Scientific Games International on October 4, 2024 and sell it today you would lose (340.00) from holding Scientific Games International or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.31%
Values	Daily Returns

Verizon Communications  vs.  Scientific Games International

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.

Scientific Games Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scientific Games International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Scientific Games International investors.

Pair Trading with Verizon Communications and Scientific

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

The idea behind Verizon Communications and Scientific Games International 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.