Correlation Between Alphabet and Verizon Communications

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

Diversification Opportunities for Alphabet and Verizon Communications

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Alphabet and Verizon is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Cl C and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Alphabet 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 Alphabet Cl C 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 Alphabet i.e., Alphabet and Verizon Communications go up and down completely randomly.

Pair Corralation between Alphabet and Verizon Communications

Given the investment horizon of 90 days Alphabet Cl C is expected to generate 1.86 times more return on investment than Verizon Communications. However, Alphabet is 1.86 times more volatile than Verizon Communications. It trades about 0.09 of its potential returns per unit of risk. Verizon Communications is currently generating about -0.02 per unit of risk. If you would invest  228,078  in Alphabet Cl C on March 29, 2022 and sell it today you would earn a total of  8,998  from holding Alphabet Cl C or generate 3.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Alphabet Cl C  vs.  Verizon Communications

 Performance (%) 
      Timeline 
Alphabet Cl C 
Alphabet Performance
0 of 100
Over the last 90 days Alphabet Cl C has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in July 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Structure and Payout Changes

Last Split Factor
10027455:1
Last Split Date
2015-04-27

Alphabet Price Channel

Verizon Communications 
Verizon Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Verizon Communications is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0522
Payout Ratio
0.47
Last Split Factor
1000000:93
Forward Annual Dividend Rate
2.56
Dividend Date
2022-08-01
Ex Dividend Date
2022-07-07
Last Split Date
2010-07-02

Verizon Price Channel

Alphabet and Verizon Communications Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Alphabet and Verizon Communications

The main advantage of trading using opposite Alphabet and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Cl C 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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