Correlation Between Wix and Verizon Communications

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

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

Diversification Opportunities for Wix and Verizon Communications

-0.5

Correlation Coefficient

Wix  Verizon Communications

Very good diversification

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

Pair Corralation between Wix and Verizon Communications

Assuming the 90 days trading horizon Wix is expected to generate 1.93 times more return on investment than Verizon Communications. However, Wix is 1.93 times more volatile than Verizon Communications. It trades about 0.08 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.05 per unit of risk. If you would invest  1,542  in Wix on December 4, 2024 and sell it today you would earn a total of  2,328  from holding Wix or generate 150.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Wix  vs.  Verizon Communications

Wix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wix has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Verizon Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wix and Verizon Communications

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

The idea behind Wix and Verizon Communications 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.