Correlation Between Dividend Appreciation and Verizon Communications

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

Diversification Opportunities for Dividend Appreciation and Verizon Communications

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Dividend and Verizon is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Dividend Appreciation ETF and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Dividend Appreciation 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 Dividend Appreciation ETF 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 Dividend Appreciation i.e., Dividend Appreciation and Verizon Communications go up and down completely randomly.

Pair Corralation between Dividend Appreciation and Verizon Communications

Considering the 90-day investment horizon Dividend Appreciation ETF is expected to generate 0.93 times more return on investment than Verizon Communications. However, Dividend Appreciation ETF is 1.08 times less risky than Verizon Communications. It trades about -0.37 of its potential returns per unit of risk. Verizon Communications is currently generating about -0.36 per unit of risk. If you would invest  15,031  in Dividend Appreciation ETF on June 28, 2022 and sell it today you would lose (1,278)  from holding Dividend Appreciation ETF or give up 8.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dividend Appreciation ETF  vs.  Verizon Communications

 Performance (%) 
       Timeline  
Dividend Appreciation ETF 
Dividend Performance
0 of 100
Over the last 90 days Dividend Appreciation ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Dividend Appreciation is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Dividend 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 abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Verizon Price Channel

Dividend Appreciation and Verizon Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dividend Appreciation and Verizon Communications

The main advantage of trading using opposite Dividend Appreciation and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dividend Appreciation 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 effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Dividend Appreciation as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Dividend Appreciation's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Dividend Appreciation's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Dividend Appreciation ETF.
The idea behind Dividend Appreciation ETF 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.
Verizon Communications vs. Clearwater Paper Corp
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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