Correlation Between United Parcel and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both United Parcel 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 United Parcel and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Parcel Service and Verizon Communications, you can compare the effects of market volatilities on United Parcel 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 United Parcel with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and Verizon Communications.
Diversification Opportunities for United Parcel and Verizon Communications
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between United and Verizon is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and Verizon Communications go up and down completely randomly.
Pair Corralation between United Parcel and Verizon Communications
Assuming the 90 days trading horizon United Parcel Service is expected to under-perform the Verizon Communications. But the stock apears to be less risky and, when comparing its historical volatility, United Parcel Service is 1.09 times less risky than Verizon Communications. The stock trades about -0.01 of its potential returns per unit of risk. The Verizon Communications is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 67,353 in Verizon Communications on September 13, 2024 and sell it today you would earn a total of 18,448 from holding Verizon Communications or generate 27.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Parcel Service vs. Verizon Communications
Performance |
| Timeline |
| United Parcel Service |
| Verizon Communications |
United Parcel and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Parcel and Verizon Communications
The main advantage of trading using opposite United Parcel and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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.| United Parcel vs. McEwen Mining | United Parcel vs. Monster Beverage Corp | United Parcel vs. Grupo Sports World | United Parcel vs. Delta Air Lines |
| Verizon Communications vs. Genworth Financial | Verizon Communications vs. Cognizant Technology Solutions | Verizon Communications vs. Capital One Financial | Verizon Communications vs. Applied 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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