Correlation Between Verizon Communications and Fifth Third

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

Diversification Opportunities for Verizon Communications and Fifth Third

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between Verizon and Fifth is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of Verizon Communications i.e., Verizon Communications and Fifth Third go up and down completely randomly.

Pair Corralation between Verizon Communications and Fifth Third

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Fifth Third. In addition to that, Verizon Communications is 1.71 times more volatile than Fifth Third Bancorp. It trades about -0.03 of its total potential returns per unit of risk. Fifth Third Bancorp is currently generating about 0.02 per unit of volatility. If you would invest  2,403  in Fifth Third Bancorp on May 12, 2022 and sell it today you would earn a total of  124.00  from holding Fifth Third Bancorp or generate 5.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Verizon Communications  vs.  Fifth Third Bancorp

 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Verizon Price Channel

Fifth Third Bancorp 
Fifth Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Fifth Third is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the insiders.

Fifth Price Channel

Verizon Communications and Fifth Third Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verizon Communications and Fifth Third

The main advantage of trading using opposite Verizon Communications and Fifth Third positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Fifth Third 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 Fifth Third will offset losses from the drop in Fifth Third's long position.
The idea behind Verizon Communications and Fifth Third Bancorp 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.

Fifth Third Bancorp

Pair trading matchups for Fifth Third

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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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