Correlation Between EBay and Verizon Communications

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Can any of the company-specific risk be diversified away by investing in both EBay and Verizon Communications 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 EBay and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EBay Inc and Verizon Communications, you can compare the effects of market volatilities on EBay and Verizon Communications 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 EBay with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of EBay and Verizon Communications.

Diversification Opportunities for EBay and Verizon Communications

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between EBay and Verizon is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding EBay Inc and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and EBay 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 EBay Inc are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of EBay i.e., EBay and Verizon Communications go up and down completely randomly.

Pair Corralation between EBay and Verizon Communications

Given the investment horizon of 90 days EBay Inc is expected to generate 1.13 times more return on investment than Verizon Communications. However, EBay is 1.13 times more volatile than Verizon Communications. It trades about 0.35 of its potential returns per unit of risk. Verizon Communications is currently generating about -0.25 per unit of risk. If you would invest  4,203  in EBay Inc on May 15, 2022 and sell it today you would earn a total of  741.00  from holding EBay Inc or generate 17.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

EBay Inc  vs.  Verizon Communications

 Performance (%) 
       Timeline  
EBay Inc 
EBay Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in EBay Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, EBay may actually be approaching a critical reversion point that can send shares even higher in September 2022.

EBay Price Channel

Verizon Communications 
Verizon Performance
0 of 100
Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest sluggish performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Verizon Price Channel

EBay and Verizon Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with EBay and Verizon Communications

The main advantage of trading using opposite EBay and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EBay position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' long position.
The idea behind EBay Inc and Verizon Communications pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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