Correlation Between Verizon Communications and Federal National
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Federal National 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 Federal National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Federal National Mortgage, you can compare the effects of market volatilities on Verizon Communications and Federal National 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 Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Federal National.
Diversification Opportunities for Verizon Communications and Federal National
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Verizon and Federal is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage 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 Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of Verizon Communications i.e., Verizon Communications and Federal National go up and down completely randomly.
Pair Corralation between Verizon Communications and Federal National
Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 12.46 times less return on investment than Federal National. But when comparing it to its historical volatility, Verizon Communications is 6.1 times less risky than Federal National. It trades about 0.1 of its potential returns per unit of risk. Federal National Mortgage is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 560.00 in Federal National Mortgage on August 29, 2024 and sell it today you would earn a total of 950.00 from holding Federal National Mortgage or generate 169.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Federal National Mortgage
Performance |
| Timeline |
| Verizon Communications |
| Federal National Mortgage |
Verizon Communications and Federal National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Federal National
The main advantage of trading using opposite Verizon Communications and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Federal National 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 Federal National will offset losses from the drop in Federal National's long position.| Verizon Communications vs. Merck Company | Verizon Communications vs. Pharvaris BV | Verizon Communications vs. Brinker International | Verizon Communications vs. Alcoa Corp |
| Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal National Mortgage |
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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