Correlation Between Refinaria and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Refinaria 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 Refinaria and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Refinaria de Petrleos and Verizon Communications, you can compare the effects of market volatilities on Refinaria 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 Refinaria with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Refinaria and Verizon Communications.
Diversification Opportunities for Refinaria and Verizon Communications
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Refinaria and Verizon is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Refinaria de Petrleos and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Refinaria 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 Refinaria de Petrleos 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 Refinaria i.e., Refinaria and Verizon Communications go up and down completely randomly.
Pair Corralation between Refinaria and Verizon Communications
Assuming the 90 days trading horizon Refinaria de Petrleos is expected to under-perform the Verizon Communications. In addition to that, Refinaria is 2.53 times more volatile than Verizon Communications. It trades about -0.12 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.28 per unit of volatility. If you would invest 4,085 in Verizon Communications on September 1, 2024 and sell it today you would earn a total of 334.00 from holding Verizon Communications or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Refinaria de Petrleos vs. Verizon Communications
Performance |
| Timeline |
| Refinaria de Petrleos |
| Verizon Communications |
Refinaria and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Refinaria and Verizon Communications
The main advantage of trading using opposite Refinaria and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Refinaria 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.| Refinaria vs. Lupatech SA | Refinaria vs. Recrusul SA | Refinaria vs. PDG Realty SA | Refinaria vs. OSX Brasil SA |
| Verizon Communications vs. Lupatech SA | Verizon Communications vs. Rossi Residencial SA | Verizon Communications vs. Usinas Siderrgicas de | Verizon Communications vs. Refinaria de Petrleos |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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