Correlation Between Suncor Energy and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Suncor Energy 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 Suncor Energy and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Suncor Energy and Verizon Communications CDR, you can compare the effects of market volatilities on Suncor Energy 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 Suncor Energy with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suncor Energy and Verizon Communications.
Diversification Opportunities for Suncor Energy and Verizon Communications
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Suncor and Verizon is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy and Verizon Communications CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Suncor Energy 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 Suncor Energy 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 Suncor Energy i.e., Suncor Energy and Verizon Communications go up and down completely randomly.
Pair Corralation between Suncor Energy and Verizon Communications
Assuming the 90 days horizon Suncor Energy is expected to generate 1.18 times more return on investment than Verizon Communications. However, Suncor Energy is 1.18 times more volatile than Verizon Communications CDR. It trades about 0.04 of its potential returns per unit of risk. Verizon Communications CDR is currently generating about 0.04 per unit of risk. If you would invest 3,978 in Suncor Energy on September 15, 2024 and sell it today you would earn a total of 1,259 from holding Suncor Energy or generate 31.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Suncor Energy vs. Verizon Communications CDR
Performance |
| Timeline |
| Suncor Energy |
| Verizon Communications |
Suncor Energy and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Suncor Energy and Verizon Communications
The main advantage of trading using opposite Suncor Energy and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suncor Energy 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.| Suncor Energy vs. Canadian Natural Resources | Suncor Energy vs. MEG Energy Corp | Suncor Energy vs. Baytex Energy Corp |
| Verizon Communications vs. UPS CDR | Verizon Communications vs. HOME DEPOT CDR | Verizon Communications vs. UnitedHealth Group CDR | Verizon Communications vs. Costco Wholesale Corp |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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