Correlation Between Verizon Communications and ONEOK
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and ONEOK 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 ONEOK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and ONEOK Inc, you can compare the effects of market volatilities on Verizon Communications and ONEOK 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 ONEOK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and ONEOK.
Diversification Opportunities for Verizon Communications and ONEOK
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Verizon and ONEOK is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc 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 ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Verizon Communications i.e., Verizon Communications and ONEOK go up and down completely randomly.
Pair Corralation between Verizon Communications and ONEOK
Assuming the 90 days trading horizon Verizon Communications is expected to generate 2.22 times less return on investment than ONEOK. But when comparing it to its historical volatility, Verizon Communications is 1.02 times less risky than ONEOK. It trades about 0.04 of its potential returns per unit of risk. ONEOK Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,457 in ONEOK Inc on December 11, 2024 and sell it today you would earn a total of 2,629 from holding ONEOK Inc or generate 40.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.43% |
| Values | Daily Returns |
Verizon Communications vs. ONEOK Inc
Performance |
| Timeline |
| Verizon Communications |
| ONEOK Inc |
Verizon Communications and ONEOK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and ONEOK
The main advantage of trading using opposite Verizon Communications and ONEOK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, ONEOK 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 ONEOK will offset losses from the drop in ONEOK's long position.| Verizon Communications vs. AMG Advanced Metallurgical | ||
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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