Correlation Between Verizon Communications and State Street
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and State Street 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 State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and State Street, you can compare the effects of market volatilities on Verizon Communications and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and State Street.
Diversification Opportunities for Verizon Communications and State Street
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Verizon and State is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of Verizon Communications i.e., Verizon Communications and State Street go up and down completely randomly.
Pair Corralation between Verizon Communications and State Street
Assuming the 90 days horizon Verizon Communications is expected to generate 1.62 times less return on investment than State Street. But when comparing it to its historical volatility, Verizon Communications is 1.09 times less risky than State Street. It trades about 0.12 of its potential returns per unit of risk. State Street is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 127,466 in State Street on September 2, 2024 and sell it today you would earn a total of 69,034 from holding State Street or generate 54.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. State Street
Performance |
| Timeline |
| Verizon Communications |
| State Street |
Verizon Communications and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and State Street
The main advantage of trading using opposite Verizon Communications and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Verizon Communications vs. McEwen Mining | Verizon Communications vs. Cognizant Technology Solutions | Verizon Communications vs. First Republic Bank | Verizon Communications vs. Samsung Electronics Co |
| State Street vs. The Bank of | State Street vs. Monster Beverage Corp | State Street vs. Applied Materials | State Street vs. Martin Marietta 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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