Correlation Between Aker BP and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Aker BP 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 Aker BP and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aker BP ASA and Verizon Communications, you can compare the effects of market volatilities on Aker BP 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 Aker BP with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker BP and Verizon Communications.
Diversification Opportunities for Aker BP and Verizon Communications
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aker and Verizon is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Aker BP 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 Aker BP ASA 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 Aker BP i.e., Aker BP and Verizon Communications go up and down completely randomly.
Pair Corralation between Aker BP and Verizon Communications
Assuming the 90 days trading horizon Aker BP ASA is expected to under-perform the Verizon Communications. In addition to that, Aker BP is 1.22 times more volatile than Verizon Communications. It trades about -0.05 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.07 per unit of volatility. If you would invest 4,188 in Verizon Communications on September 2, 2024 and sell it today you would earn a total of 257.00 from holding Verizon Communications or generate 6.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aker BP ASA vs. Verizon Communications
Performance |
| Timeline |
| Aker BP ASA |
| Verizon Communications |
Aker BP and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aker BP and Verizon Communications
The main advantage of trading using opposite Aker BP and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker BP 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.| Aker BP vs. Uniper SE | Aker BP vs. Mulberry Group PLC | Aker BP vs. London Security Plc | Aker BP vs. Triad Group PLC |
| Verizon Communications vs. Uniper SE | Verizon Communications vs. Mulberry Group PLC | Verizon Communications vs. London Security Plc | Verizon Communications vs. Triad Group PLC |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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