Correlation Between Verizon Communications and Etsy

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

Diversification Opportunities for Verizon Communications and Etsy

-0.79
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Verizon and Etsy is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc 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 Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of Verizon Communications i.e., Verizon Communications and Etsy go up and down completely randomly.

Pair Corralation between Verizon Communications and Etsy

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Etsy. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.84 times less risky than Etsy. The stock trades about -0.25 of its potential returns per unit of risk. The Etsy Inc is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  8,744  in Etsy Inc on May 20, 2022 and sell it today you would earn a total of  2,947  from holding Etsy Inc or generate 33.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

Verizon Communications  vs.  Etsy Inc

 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Verizon Price Channel

Etsy Inc 
Etsy Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Etsy Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Etsy showed solid returns over the last few months and may actually be approaching a breakup point.

Etsy Price Channel

Verizon Communications and Etsy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verizon Communications and Etsy

The main advantage of trading using opposite Verizon Communications and Etsy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Etsy 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 Etsy will offset losses from the drop in Etsy's long position.
The idea behind Verizon Communications and Etsy Inc 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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.

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