Correlation Between Verizon Communications and ProShares MSCI
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and ProShares MSCI 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 ProShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and ProShares MSCI EAFE, you can compare the effects of market volatilities on Verizon Communications and ProShares MSCI 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 ProShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and ProShares MSCI.
Diversification Opportunities for Verizon Communications and ProShares MSCI
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Verizon and ProShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and ProShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares MSCI EAFE 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 ProShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares MSCI EAFE has no effect on the direction of Verizon Communications i.e., Verizon Communications and ProShares MSCI go up and down completely randomly.
Pair Corralation between Verizon Communications and ProShares MSCI
Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 1.67 times more return on investment than ProShares MSCI. However, Verizon Communications is 1.67 times more volatile than ProShares MSCI EAFE. It trades about 0.07 of its potential returns per unit of risk. ProShares MSCI EAFE is currently generating about -0.03 per unit of risk. If you would invest 4,235 in Verizon Communications on December 10, 2024 and sell it today you would earn a total of 414.00 from holding Verizon Communications or generate 9.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. ProShares MSCI EAFE
Performance |
| Timeline |
| Verizon Communications |
| ProShares MSCI EAFE |
Verizon Communications and ProShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and ProShares MSCI
The main advantage of trading using opposite Verizon Communications and ProShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, ProShares MSCI 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 ProShares MSCI will offset losses from the drop in ProShares MSCI's long position.| Verizon Communications vs. T Mobile | ||
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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