Correlation Between Lands End and Verizon Communications

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

Diversification Opportunities for Lands End and Verizon Communications

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Lands and Verizon is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lands End and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Lands End 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 Lands End 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 Lands End i.e., Lands End and Verizon Communications go up and down completely randomly.

Pair Corralation between Lands End and Verizon Communications

Allowing for the 90-day total investment horizon Lands End is expected to generate 2.39 times more return on investment than Verizon Communications. However, Lands End is 2.39 times more volatile than Verizon Communications. It trades about 0.25 of its potential returns per unit of risk. Verizon Communications is currently generating about -0.1 per unit of risk. If you would invest  1,111  in Lands End on May 16, 2022 and sell it today you would earn a total of  501.00  from holding Lands End or generate 45.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy97.67%
ValuesDaily Returns

Lands End  vs.  Verizon Communications

 Performance (%) 
       Timeline  
Lands End 
Lands Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Lands End are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, Lands End exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lands 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 fairly strong basic indicators, Verizon Communications is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Verizon Price Channel

Lands End and Verizon Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lands End and Verizon Communications

The main advantage of trading using opposite Lands End and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lands End 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 Lands End 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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