Correlation Between Verizon Communications and AB SKF
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and AB SKF 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 AB SKF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and AB SKF B, you can compare the effects of market volatilities on Verizon Communications and AB SKF 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 AB SKF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and AB SKF.
Diversification Opportunities for Verizon Communications and AB SKF
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Verizon and 0NWX is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and AB SKF B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF B 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 AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF B has no effect on the direction of Verizon Communications i.e., Verizon Communications and AB SKF go up and down completely randomly.
Pair Corralation between Verizon Communications and AB SKF
Assuming the 90 days trading horizon Verizon Communications is expected to generate 1.33 times less return on investment than AB SKF. But when comparing it to its historical volatility, Verizon Communications is 1.27 times less risky than AB SKF. It trades about 0.07 of its potential returns per unit of risk. AB SKF B is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 19,295 in AB SKF B on September 2, 2024 and sell it today you would earn a total of 1,555 from holding AB SKF B or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. AB SKF B
Performance |
| Timeline |
| Verizon Communications |
| AB SKF B |
Verizon Communications and AB SKF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and AB SKF
The main advantage of trading using opposite Verizon Communications and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, AB SKF 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 AB SKF will offset losses from the drop in AB SKF'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 |
| AB SKF vs. Uniper SE | AB SKF vs. Mulberry Group PLC | AB SKF vs. London Security Plc | AB SKF 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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