Correlation Between Square and VeriSign
Can any of the company-specific risk be diversified away by investing in both Square and VeriSign 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 Square and VeriSign into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Square Inc and VeriSign, you can compare the effects of market volatilities on Square and VeriSign 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 Square with a short position of VeriSign. Check out your portfolio center. Please also check ongoing floating volatility patterns of Square and VeriSign.
Diversification Opportunities for Square and VeriSign
Poor diversification
The 3 months correlation between Square and VeriSign is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Square Inc and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign and Square 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 Square Inc are associated (or correlated) with VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of Square i.e., Square and VeriSign go up and down completely randomly.
Pair Corralation between Square and VeriSign
Assuming the 90 days horizon Square Inc is expected to generate 2.35 times more return on investment than VeriSign. However, Square is 2.35 times more volatile than VeriSign. It trades about 0.11 of its potential returns per unit of risk. VeriSign is currently generating about 0.0 per unit of risk. If you would invest 3,674 in Square Inc on August 25, 2024 and sell it today you would earn a total of 5,197 from holding Square Inc or generate 141.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Square Inc vs. VeriSign
Performance |
| Timeline |
| Square Inc |
| VeriSign |
Square and VeriSign Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Square and VeriSign
The main advantage of trading using opposite Square and VeriSign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Square position performs unexpectedly, VeriSign 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 VeriSign will offset losses from the drop in VeriSign's long position.| Square vs. Shopify | Square vs. BYD Company Limited | Square vs. PayPal Holdings | Square vs. Palantir Technologies |
| VeriSign vs. Martin Marietta Materials | VeriSign vs. PUBLIC STORAGE PRFO | VeriSign vs. Vulcan Materials | VeriSign vs. Rayonier Advanced Materials |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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