Correlation Between Bread Financial and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Bread Financial and Verizon Communications 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 Bread Financial and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bread Financial Holdings and Verizon Communications, you can compare the effects of market volatilities on Bread Financial and Verizon Communications 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 Bread Financial with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Verizon Communications.
Diversification Opportunities for Bread Financial and Verizon Communications
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bread and Verizon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Bread Financial i.e., Bread Financial and Verizon Communications go up and down completely randomly.
Pair Corralation between Bread Financial and Verizon Communications
Assuming the 90 days trading horizon Bread Financial Holdings is expected to generate 1.96 times more return on investment than Verizon Communications. However, Bread Financial is 1.96 times more volatile than Verizon Communications. It trades about 0.09 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.08 per unit of risk. If you would invest 3,753 in Bread Financial Holdings on August 28, 2024 and sell it today you would earn a total of 4,583 from holding Bread Financial Holdings or generate 122.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.21% |
| Values | Daily Returns |
Bread Financial Holdings vs. Verizon Communications
Performance |
| Timeline |
| Bread Financial Holdings |
| Verizon Communications |
Bread Financial and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bread Financial and Verizon Communications
The main advantage of trading using opposite Bread Financial and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bread Financial position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.| Bread Financial vs. Fras le SA | Bread Financial vs. Clave Indices De | Bread Financial vs. BTG Pactual Logstica | Bread Financial vs. Telefonaktiebolaget LM Ericsson |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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