Correlation Between NYSE Composite and VERIZON

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and VERIZON 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 NYSE Composite and VERIZON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and VERIZON MUNICATIONS INC, you can compare the effects of market volatilities on NYSE Composite and VERIZON 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 NYSE Composite with a short position of VERIZON. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and VERIZON.

Diversification Opportunities for NYSE Composite and VERIZON

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between NYSE and VERIZON is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and VERIZON MUNICATIONS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VERIZON MUNICATIONS INC and NYSE Composite 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 NYSE Composite are associated (or correlated) with VERIZON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VERIZON MUNICATIONS INC has no effect on the direction of NYSE Composite i.e., NYSE Composite and VERIZON go up and down completely randomly.
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Pair Corralation between NYSE Composite and VERIZON

Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.16 times less return on investment than VERIZON. But when comparing it to its historical volatility, NYSE Composite is 1.84 times less risky than VERIZON. It trades about 0.24 of its potential returns per unit of risk. VERIZON MUNICATIONS INC is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  9,272  in VERIZON MUNICATIONS INC on August 27, 2024 and sell it today you would earn a total of  362.00  from holding VERIZON MUNICATIONS INC or generate 3.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

NYSE Composite  vs.  VERIZON MUNICATIONS INC

 Performance 
       Timeline  

NYSE Composite and VERIZON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and VERIZON

The main advantage of trading using opposite NYSE Composite and VERIZON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, VERIZON 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 will offset losses from the drop in VERIZON's long position.
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The idea behind NYSE Composite and VERIZON MUNICATIONS INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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