Correlation Between Verizon Communications and Aker BP
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Aker BP 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 Aker BP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Aker BP ASA, you can compare the effects of market volatilities on Verizon Communications and Aker BP 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 Aker BP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Aker BP.
Diversification Opportunities for Verizon Communications and Aker BP
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Verizon and Aker is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Aker BP ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker BP ASA 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 Aker BP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker BP ASA has no effect on the direction of Verizon Communications i.e., Verizon Communications and Aker BP go up and down completely randomly.
Pair Corralation between Verizon Communications and Aker BP
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.86 times more return on investment than Aker BP. However, Verizon Communications is 1.17 times less risky than Aker BP. It trades about 0.03 of its potential returns per unit of risk. Aker BP ASA is currently generating about 0.0 per unit of risk. If you would invest 3,726 in Verizon Communications on September 2, 2024 and sell it today you would earn a total of 719.00 from holding Verizon Communications or generate 19.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Verizon Communications vs. Aker BP ASA
Performance |
| Timeline |
| Verizon Communications |
| Aker BP ASA |
Verizon Communications and Aker BP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Aker BP
The main advantage of trading using opposite Verizon Communications and Aker BP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Aker BP 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 Aker BP will offset losses from the drop in Aker BP's long position.| Verizon Communications vs. Uniper SE | Verizon Communications vs. Mulberry Group PLC | Verizon Communications vs. London Security Plc | Verizon Communications vs. Triad Group PLC |
| Aker BP vs. Uniper SE | Aker BP vs. Mulberry Group PLC | Aker BP vs. London Security Plc | Aker BP 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 CEOs Directory module to screen CEOs from public companies around the world.
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