Correlation Between Verizon Communications and Marstons PLC
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Marstons PLC 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 Marstons PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Marstons PLC, you can compare the effects of market volatilities on Verizon Communications and Marstons PLC 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 Marstons PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Marstons PLC.
Diversification Opportunities for Verizon Communications and Marstons PLC
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Verizon and Marstons is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Marstons PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marstons PLC 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 Marstons PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marstons PLC has no effect on the direction of Verizon Communications i.e., Verizon Communications and Marstons PLC go up and down completely randomly.
Pair Corralation between Verizon Communications and Marstons PLC
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.74 times more return on investment than Marstons PLC. However, Verizon Communications is 1.35 times less risky than Marstons PLC. It trades about -0.02 of its potential returns per unit of risk. Marstons PLC is currently generating about -0.14 per unit of risk. If you would invest 4,015 in Verizon Communications on November 6, 2024 and sell it today you would lose (30.00) from holding Verizon Communications or give up 0.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Marstons PLC
Performance |
| Timeline |
| Verizon Communications |
| Marstons PLC |
Verizon Communications and Marstons PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Marstons PLC
The main advantage of trading using opposite Verizon Communications and Marstons PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Marstons PLC 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 Marstons PLC will offset losses from the drop in Marstons PLC'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 |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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