Correlation Between Verizon Communications and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and STMicroelectronics NV, you can compare the effects of market volatilities on Verizon Communications and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and STMicroelectronics.
Diversification Opportunities for Verizon Communications and STMicroelectronics
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Verizon and STMicroelectronics is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Verizon Communications i.e., Verizon Communications and STMicroelectronics go up and down completely randomly.
Pair Corralation between Verizon Communications and STMicroelectronics
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.62 times more return on investment than STMicroelectronics. However, Verizon Communications is 1.61 times less risky than STMicroelectronics. It trades about 0.09 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.08 per unit of risk. If you would invest 2,994 in Verizon Communications on August 27, 2024 and sell it today you would earn a total of 1,189 from holding Verizon Communications or generate 39.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 81.53% |
| Values | Daily Returns |
Verizon Communications vs. STMicroelectronics NV
Performance |
| Timeline |
| Verizon Communications |
| STMicroelectronics |
Verizon Communications and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and STMicroelectronics
The main advantage of trading using opposite Verizon Communications and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Verizon Communications vs. Take Two Interactive Software | Verizon Communications vs. BIONTECH SE DRN | Verizon Communications vs. Micron Technology | Verizon Communications vs. Align Technology |
| STMicroelectronics vs. GP Investments | STMicroelectronics vs. Fidelity National Information | STMicroelectronics vs. Verizon Communications | STMicroelectronics vs. Marfrig Global Foods |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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