Correlation Between Verizon Communications and VF Corp
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and VF Corp 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 VF Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and VF Corp, you can compare the effects of market volatilities on Verizon Communications and VF Corp 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 VF Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and VF Corp.
Diversification Opportunities for Verizon Communications and VF Corp
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Verizon and 0R30 is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and VF Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VF Corp 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 VF Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VF Corp has no effect on the direction of Verizon Communications i.e., Verizon Communications and VF Corp go up and down completely randomly.
Pair Corralation between Verizon Communications and VF Corp
Assuming the 90 days trading horizon Verizon Communications is expected to under-perform the VF Corp. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.36 times less risky than VF Corp. The stock trades about -0.02 of its potential returns per unit of risk. The VF Corp is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 2,153 in VF Corp on November 7, 2024 and sell it today you would earn a total of 500.00 from holding VF Corp or generate 23.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Verizon Communications vs. VF Corp
Performance |
| Timeline |
| Verizon Communications |
| VF Corp |
Verizon Communications and VF Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and VF Corp
The main advantage of trading using opposite Verizon Communications and VF Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, VF Corp 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 VF Corp will offset losses from the drop in VF Corp's long position.| Verizon Communications vs. Tyson Foods Cl | Verizon Communications vs. Fevertree Drinks Plc | Verizon Communications vs. Rheinmetall AG | Verizon Communications vs. Dalata Hotel Group |
| VF Corp vs. Samsung Electronics Co | VF Corp vs. Samsung Electronics Co | VF Corp vs. Toyota Motor Corp | VF Corp vs. Reliance Industries Ltd |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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