Correlation Between Verizon Communications and General Dynamics
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and General Dynamics 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 General Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and General Dynamics, you can compare the effects of market volatilities on Verizon Communications and General Dynamics 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 General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and General Dynamics.
Diversification Opportunities for Verizon Communications and General Dynamics
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Verizon and General is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics 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 General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of Verizon Communications i.e., Verizon Communications and General Dynamics go up and down completely randomly.
Pair Corralation between Verizon Communications and General Dynamics
Assuming the 90 days horizon Verizon Communications is expected to generate 1.65 times more return on investment than General Dynamics. However, Verizon Communications is 1.65 times more volatile than General Dynamics. It trades about 0.05 of its potential returns per unit of risk. General Dynamics is currently generating about 0.05 per unit of risk. If you would invest 65,165 in Verizon Communications on September 3, 2024 and sell it today you would earn a total of 25,585 from holding Verizon Communications or generate 39.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Verizon Communications vs. General Dynamics
Performance |
| Timeline |
| Verizon Communications |
| General Dynamics |
Verizon Communications and General Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and General Dynamics
The main advantage of trading using opposite Verizon Communications and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, General Dynamics 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 General Dynamics will offset losses from the drop in General Dynamics' long position.| Verizon Communications vs. FibraHotel | Verizon Communications vs. Applied Materials | Verizon Communications vs. Lloyds Banking Group | Verizon Communications vs. McEwen Mining |
| General Dynamics vs. Prudential Financial | General Dynamics vs. Grupo Sports World | General Dynamics vs. Verizon Communications | General Dynamics vs. DXC Technology |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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