Correlation Between Verizon Communications and Diageo Plc
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Diageo Plc 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 Diageo Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Diageo plc, you can compare the effects of market volatilities on Verizon Communications and Diageo Plc 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 Diageo Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Diageo Plc.
Diversification Opportunities for Verizon Communications and Diageo Plc
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Verizon and Diageo is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Diageo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo plc 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 Diageo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo plc has no effect on the direction of Verizon Communications i.e., Verizon Communications and Diageo Plc go up and down completely randomly.
Pair Corralation between Verizon Communications and Diageo Plc
Assuming the 90 days horizon Verizon Communications is expected to generate 1.15 times more return on investment than Diageo Plc. However, Verizon Communications is 1.15 times more volatile than Diageo plc. It trades about 0.06 of its potential returns per unit of risk. Diageo plc is currently generating about 0.01 per unit of risk. If you would invest 64,905 in Verizon Communications on November 3, 2024 and sell it today you would earn a total of 16,664 from holding Verizon Communications or generate 25.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Verizon Communications vs. Diageo plc
Performance |
| Timeline |
| Verizon Communications |
| Diageo plc |
Verizon Communications and Diageo Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Diageo Plc
The main advantage of trading using opposite Verizon Communications and Diageo Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Diageo Plc 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 Diageo Plc will offset losses from the drop in Diageo Plc's long position.| Verizon Communications vs. KB Home | Verizon Communications vs. McEwen Mining | Verizon Communications vs. Hoteles City Express | Verizon Communications vs. Grupo Sports World |
| Diageo Plc vs. Lloyds Banking Group | Diageo Plc vs. CVS Health | Diageo Plc vs. Monster Beverage Corp | Diageo Plc vs. Delta Air Lines |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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