Correlation Between Verizon Communications and A O
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and A O 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 A O into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and A O Smith, you can compare the effects of market volatilities on Verizon Communications and A O 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 A O. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and A O.
Diversification Opportunities for Verizon Communications and A O
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Verizon and AOS is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and A O Smith in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A O Smith 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 A O. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A O Smith has no effect on the direction of Verizon Communications i.e., Verizon Communications and A O go up and down completely randomly.
Pair Corralation between Verizon Communications and A O
Assuming the 90 days horizon Verizon Communications is expected to generate 588.97 times more return on investment than A O. However, Verizon Communications is 588.97 times more volatile than A O Smith. It trades about 0.02 of its potential returns per unit of risk. A O Smith is currently generating about 0.14 per unit of risk. If you would invest 84,251 in Verizon Communications on September 12, 2024 and sell it today you would earn a total of 1,550 from holding Verizon Communications or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. A O Smith
Performance |
| Timeline |
| Verizon Communications |
| A O Smith |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Verizon Communications and A O Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and A O
The main advantage of trading using opposite Verizon Communications and A O positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, A O 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 A O will offset losses from the drop in A O's long position.| Verizon Communications vs. Genworth Financial | Verizon Communications vs. Cognizant Technology Solutions | Verizon Communications vs. Capital One Financial | Verizon Communications vs. Applied Materials |
| A O vs. Samsung Electronics Co | A O vs. Costco Wholesale | A O vs. Lloyds Banking Group | A O vs. UnitedHealth Group Incorporated |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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