Correlation Between Verizon Communications and FT Vest

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

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

Diversification Opportunities for Verizon Communications and FT Vest

0.06

Correlation Coefficient

Verizon Communications  FT Vest

Significant diversification

The 3 months correlation between Verizon and XIMR is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity 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 FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of Verizon Communications i.e., Verizon Communications and FT Vest go up and down completely randomly.

Pair Corralation between Verizon Communications and FT Vest

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 7.5 times more return on investment than FT Vest. However, Verizon Communications is 7.5 times more volatile than FT Vest Equity. It trades about 0.05 of its potential returns per unit of risk. FT Vest Equity is currently generating about 0.15 per unit of risk. If you would invest  3,757  in Verizon Communications on December 5, 2024 and sell it today you would earn a total of  530.00  from holding Verizon Communications or generate 14.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Verizon Communications  vs.  FT Vest Equity

Verizon Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

FT Vest Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FT Vest Equity are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, FT Vest is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Verizon Communications and FT Vest

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

The idea behind Verizon Communications and FT Vest Equity 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.