Correlation Between Verizon Communications and Spectra7 Microsystems
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Spectra7 Microsystems 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 Spectra7 Microsystems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Spectra7 Microsystems, you can compare the effects of market volatilities on Verizon Communications and Spectra7 Microsystems 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 Spectra7 Microsystems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Spectra7 Microsystems.
Diversification Opportunities for Verizon Communications and Spectra7 Microsystems
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Verizon and Spectra7 is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Spectra7 Microsystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectra7 Microsystems 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 Spectra7 Microsystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectra7 Microsystems has no effect on the direction of Verizon Communications i.e., Verizon Communications and Spectra7 Microsystems go up and down completely randomly.
Pair Corralation between Verizon Communications and Spectra7 Microsystems
Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.09 times more return on investment than Spectra7 Microsystems. However, Verizon Communications is 11.64 times less risky than Spectra7 Microsystems. It trades about -0.27 of its potential returns per unit of risk. Spectra7 Microsystems is currently generating about -0.08 per unit of risk. If you would invest 4,319 in Verizon Communications on October 25, 2024 and sell it today you would lose (424.00) from holding Verizon Communications or give up 9.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.12% |
| Values | Daily Returns |
Verizon Communications vs. Spectra7 Microsystems
Performance |
| Timeline |
| Verizon Communications |
| Spectra7 Microsystems |
Verizon Communications and Spectra7 Microsystems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Spectra7 Microsystems
The main advantage of trading using opposite Verizon Communications and Spectra7 Microsystems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Spectra7 Microsystems 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 Spectra7 Microsystems will offset losses from the drop in Spectra7 Microsystems' long position.| Verizon Communications vs. ATT Inc | Verizon Communications vs. Bank of America | Verizon Communications vs. RLJ Lodging Trust | Verizon Communications vs. PennyMac Finl Svcs |
| Spectra7 Microsystems vs. Atomera | Spectra7 Microsystems vs. ASML Holding NV | Spectra7 Microsystems vs. Applied Materials | Spectra7 Microsystems vs. Aehr Test Systems |
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 CEOs Directory module to screen CEOs from public companies around the world.
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