Correlation Between Verizon Communications and XIAOMI

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Can any of the company-specific risk be diversified away by investing in both Verizon Communications and XIAOMI 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 XIAOMI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and XIAOMI 3375 29 APR 30, you can compare the effects of market volatilities on Verizon Communications and XIAOMI 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 XIAOMI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and XIAOMI.

Diversification Opportunities for Verizon Communications and XIAOMI

VerizonXIAOMIDiversified AwayVerizonXIAOMIDiversified Away100%
-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Verizon and XIAOMI is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and XIAOMI 3375 29 APR 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XIAOMI 3375 29 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 XIAOMI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XIAOMI 3375 29 has no effect on the direction of Verizon Communications i.e., Verizon Communications and XIAOMI go up and down completely randomly.

Pair Corralation between Verizon Communications and XIAOMI

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.46 times more return on investment than XIAOMI. However, Verizon Communications is 2.19 times less risky than XIAOMI. It trades about -0.11 of its potential returns per unit of risk. XIAOMI 3375 29 APR 30 is currently generating about -0.34 per unit of risk. If you would invest  4,397  in Verizon Communications on September 24, 2024 and sell it today you would lose (404.00) from holding Verizon Communications or give up 9.19% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy20.31%
ValuesDaily Returns

Verizon Communications  vs.  XIAOMI 3375 29 APR 30

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -50510
JavaScript chart by amCharts 3.21.15VZ Y77108AA9
       Timeline  
Verizon Communications 

Risk-Adjusted Performance

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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 weak 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec4041424344
XIAOMI 3375 29 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days XIAOMI 3375 29 APR 30 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for XIAOMI 3375 29 APR 30 investors.
JavaScript chart by amCharts 3.21.158082848688909294

Verizon Communications and XIAOMI Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.13-1.62-1.11-0.6-0.08830.380.891.41.91 0.100.150.200.25
JavaScript chart by amCharts 3.21.15VZ Y77108AA9
       Returns  

Pair Trading with Verizon Communications and XIAOMI

The main advantage of trading using opposite Verizon Communications and XIAOMI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, XIAOMI 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 XIAOMI will offset losses from the drop in XIAOMI's long position.
The idea behind Verizon Communications and XIAOMI 3375 29 APR 30 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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