Correlation Between Verizon Communications and VanEck Vectors
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and VanEck Vectors 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 VanEck Vectors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and VanEck Vectors ETF, you can compare the effects of market volatilities on Verizon Communications and VanEck Vectors 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 VanEck Vectors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and VanEck Vectors.
Diversification Opportunities for Verizon Communications and VanEck Vectors
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Verizon and VanEck is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and VanEck Vectors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors ETF 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 VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors ETF has no effect on the direction of Verizon Communications i.e., Verizon Communications and VanEck Vectors go up and down completely randomly.
Pair Corralation between Verizon Communications and VanEck Vectors
Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 1.75 times more return on investment than VanEck Vectors. However, Verizon Communications is 1.75 times more volatile than VanEck Vectors ETF. It trades about 0.05 of its potential returns per unit of risk. VanEck Vectors ETF is currently generating about 0.06 per unit of risk. If you would invest 3,267 in Verizon Communications on August 30, 2024 and sell it today you would earn a total of 1,171 from holding Verizon Communications or generate 35.84% 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. VanEck Vectors ETF
Performance |
| Timeline |
| Verizon Communications |
| VanEck Vectors ETF |
Verizon Communications and VanEck Vectors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and VanEck Vectors
The main advantage of trading using opposite Verizon Communications and VanEck Vectors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, VanEck Vectors 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 VanEck Vectors will offset losses from the drop in VanEck Vectors' long position.| Verizon Communications vs. Merck Company | Verizon Communications vs. Pharvaris BV | Verizon Communications vs. Brinker International | Verizon Communications vs. Alcoa Corp |
| VanEck Vectors vs. VanEck Morningstar International | VanEck Vectors vs. VanEck ETF Trust | VanEck Vectors vs. VanEck ETF Trust | VanEck Vectors vs. iShares Morningstar Mid Cap |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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