Correlation Between Verizon Communications and Big 5

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Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Big 5 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 Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Big 5 Sporting, you can compare the effects of market volatilities on Verizon Communications and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Big 5.

Diversification Opportunities for Verizon Communications and Big 5

-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between Verizon and Big 5 is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Verizon Communications i.e., Verizon Communications and Big 5 go up and down completely randomly.

Pair Corralation between Verizon Communications and Big 5

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Big 5. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 4.53 times less risky than Big 5. The stock trades about -0.05 of its potential returns per unit of risk. The Big 5 Sporting is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  751.00  in Big 5 Sporting on June 27, 2022 and sell it today you would earn a total of  320.00  from holding Big 5 Sporting or generate 42.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Verizon Communications  vs.  Big 5 Sporting

 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 unsteady 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

Big 5 Sporting 
Big 5 Performance
0 of 100
Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Big 5 is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Big 5 Price Channel

Verizon Communications and Big 5 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verizon Communications and Big 5

The main advantage of trading using opposite Verizon Communications and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.
Verizon Communications vs. BUSHVELD MINERALS LTD
The idea behind Verizon Communications and Big 5 Sporting 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.
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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