Correlation Between Verizon Communications and CBRE
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and CBRE 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 Verizon Communications and CBRE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and CBRE Group, you can compare the effects of market volatilities on Verizon Communications and CBRE 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 Verizon Communications with a short position of CBRE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and CBRE.
Diversification Opportunities for Verizon Communications and CBRE
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Verizon and CBRE is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and CBRE Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBRE Group and Verizon Communications 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 Verizon Communications are associated (or correlated) with CBRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBRE Group has no effect on the direction of Verizon Communications i.e., Verizon Communications and CBRE go up and down completely randomly.
Pair Corralation between Verizon Communications and CBRE
Assuming the 90 days trading horizon Verizon Communications is expected to generate 2.27 times less return on investment than CBRE. But when comparing it to its historical volatility, Verizon Communications is 3.43 times less risky than CBRE. It trades about 0.39 of its potential returns per unit of risk. CBRE Group is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 61,080 in CBRE Group on August 31, 2024 and sell it today you would earn a total of 17,845 from holding CBRE Group or generate 29.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Verizon Communications vs. CBRE Group
Performance |
| Timeline |
| Verizon Communications |
| CBRE Group |
Verizon Communications and CBRE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and CBRE
The main advantage of trading using opposite Verizon Communications and CBRE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, CBRE 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 CBRE will offset losses from the drop in CBRE's long position.The idea behind Verizon Communications and CBRE Group 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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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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