Correlation Between Verizon Communications and Akamai Technologies

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

Diversification Opportunities for Verizon Communications and Akamai Technologies

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between Verizon and Akamai is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Akamai Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akamai Technologies 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 Akamai Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akamai Technologies has no effect on the direction of Verizon Communications i.e., Verizon Communications and Akamai Technologies go up and down completely randomly.

Pair Corralation between Verizon Communications and Akamai Technologies

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Akamai Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.63 times less risky than Akamai Technologies. The stock trades about -0.03 of its potential returns per unit of risk. The Akamai Technologies is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  10,873  in Akamai Technologies on May 10, 2022 and sell it today you would lose (1,224)  from holding Akamai Technologies or give up 11.26% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Verizon Communications  vs.  Akamai Technologies

 Performance (%) 
       Timeline  
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 latest stock price disturbance, may contribute to short-term losses for the investors.

Verizon Price Channel

Akamai Technologies 
Akamai Performance
0 of 100
Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Akamai Technologies is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Akamai Price Channel

Verizon Communications and Akamai Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verizon Communications and Akamai Technologies

The main advantage of trading using opposite Verizon Communications and Akamai Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Akamai Technologies 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 Akamai Technologies will offset losses from the drop in Akamai Technologies' long position.
The idea behind Verizon Communications and Akamai Technologies 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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