Correlation Between American Tower and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both American Tower 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 American Tower and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Tower REIT and Verizon Communications, you can compare the effects of market volatilities on American Tower 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 American Tower with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Tower and Verizon Communications.
Diversification Opportunities for American Tower and Verizon Communications
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Verizon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding American Tower REIT and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and American Tower 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 American Tower REIT 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 American Tower i.e., American Tower and Verizon Communications go up and down completely randomly.
Pair Corralation between American Tower and Verizon Communications
Assuming the 90 days trading horizon American Tower REIT is expected to under-perform the Verizon Communications. In addition to that, American Tower is 1.69 times more volatile than Verizon Communications. It trades about -0.16 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.22 per unit of volatility. If you would invest 4,155 in Verizon Communications on August 28, 2024 and sell it today you would earn a total of 230.00 from holding Verizon Communications or generate 5.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Tower REIT vs. Verizon Communications
Performance |
| Timeline |
| American Tower REIT |
| Verizon Communications |
American Tower and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Tower and Verizon Communications
The main advantage of trading using opposite American Tower and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Tower 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.| American Tower vs. Coeur Mining | American Tower vs. McEwen Mining | American Tower vs. Premier Foods PLC | American Tower vs. Cornish Metals |
| Verizon Communications vs. Samsung Electronics Co | Verizon Communications vs. Samsung Electronics Co | Verizon Communications vs. Hyundai Motor | Verizon Communications vs. Toyota Motor Corp |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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