Correlation Between Emera and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Emera 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 Emera and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emera Inc and Verizon Communications CDR, you can compare the effects of market volatilities on Emera 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 Emera with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emera and Verizon Communications.
Diversification Opportunities for Emera and Verizon Communications
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Emera and Verizon is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Emera Inc and Verizon Communications CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Emera 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 Emera Inc 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 Emera i.e., Emera and Verizon Communications go up and down completely randomly.
Pair Corralation between Emera and Verizon Communications
Assuming the 90 days trading horizon Emera Inc is expected to generate 0.72 times more return on investment than Verizon Communications. However, Emera Inc is 1.39 times less risky than Verizon Communications. It trades about 0.09 of its potential returns per unit of risk. Verizon Communications CDR is currently generating about 0.01 per unit of risk. If you would invest 2,049 in Emera Inc on October 22, 2024 and sell it today you would earn a total of 411.00 from holding Emera Inc or generate 20.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emera Inc vs. Verizon Communications CDR
Performance |
| Timeline |
| Emera Inc |
| Verizon Communications |
Emera and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emera and Verizon Communications
The main advantage of trading using opposite Emera and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emera 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.| Emera vs. Emera Pref F | Emera vs. Emera Srs C | Emera vs. Fortis Pref M | Emera vs. Brookfield Renewable Partners |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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