Correlation Between Verizon Communications and ConocoPhillips
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and ConocoPhillips 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 ConocoPhillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and ConocoPhillips, you can compare the effects of market volatilities on Verizon Communications and ConocoPhillips 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 ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and ConocoPhillips.
Diversification Opportunities for Verizon Communications and ConocoPhillips
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Verizon and ConocoPhillips is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Verizon Communications i.e., Verizon Communications and ConocoPhillips go up and down completely randomly.
Pair Corralation between Verizon Communications and ConocoPhillips
Assuming the 90 days horizon Verizon Communications is expected to generate 1.09 times more return on investment than ConocoPhillips. However, Verizon Communications is 1.09 times more volatile than ConocoPhillips. It trades about 0.09 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.05 per unit of risk. If you would invest 71,303 in Verizon Communications on September 13, 2024 and sell it today you would earn a total of 14,498 from holding Verizon Communications or generate 20.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. ConocoPhillips
Performance |
| Timeline |
| Verizon Communications |
| ConocoPhillips |
Verizon Communications and ConocoPhillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and ConocoPhillips
The main advantage of trading using opposite Verizon Communications and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' long position.| 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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