Correlation Between Verizon Communications and Halliburton
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Halliburton 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 Halliburton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Halliburton, you can compare the effects of market volatilities on Verizon Communications and Halliburton 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 Halliburton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Halliburton.
Diversification Opportunities for Verizon Communications and Halliburton
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Verizon and Halliburton is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of Verizon Communications i.e., Verizon Communications and Halliburton go up and down completely randomly.
Pair Corralation between Verizon Communications and Halliburton
Assuming the 90 days horizon Verizon Communications is expected to generate 0.73 times more return on investment than Halliburton. However, Verizon Communications is 1.37 times less risky than Halliburton. It trades about 0.04 of its potential returns per unit of risk. Halliburton is currently generating about -0.01 per unit of risk. If you would invest 67,353 in Verizon Communications on September 14, 2024 and sell it today you would earn a total of 18,448 from holding Verizon Communications or generate 27.39% 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. Halliburton
Performance |
| Timeline |
| Verizon Communications |
| Halliburton |
Verizon Communications and Halliburton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Halliburton
The main advantage of trading using opposite Verizon Communications and Halliburton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Halliburton 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 Halliburton will offset losses from the drop in Halliburton's long position.| Verizon Communications vs. ATT Inc | Verizon Communications vs. Vodafone Group Plc | Verizon Communications vs. Telefnica SA |
| Halliburton vs. Verizon Communications | Halliburton vs. Martin Marietta Materials | Halliburton vs. United States Steel | Halliburton vs. Grupo Carso SAB |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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