Correlation Between Verizon Communications and Shift4 Payments

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Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Shift4 Payments 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 Shift4 Payments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Shift4 Payments, you can compare the effects of market volatilities on Verizon Communications and Shift4 Payments 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 Shift4 Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Shift4 Payments.

Diversification Opportunities for Verizon Communications and Shift4 Payments

-0.75
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Verizon and Shift4 is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Shift4 Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shift4 Payments 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 Shift4 Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shift4 Payments has no effect on the direction of Verizon Communications i.e., Verizon Communications and Shift4 Payments go up and down completely randomly.

Pair Corralation between Verizon Communications and Shift4 Payments

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Shift4 Payments. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 2.45 times less risky than Shift4 Payments. The stock trades about -0.27 of its potential returns per unit of risk. The Shift4 Payments is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,594  in Shift4 Payments on July 1, 2022 and sell it today you would lose (13.00)  from holding Shift4 Payments or give up 0.28% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Verizon Communications  vs.  Shift4 Payments

 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 conflicting 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

Shift4 Payments 
Shift4 Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Shift4 Payments are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Shift4 Payments reported solid returns over the last few months and may actually be approaching a breakup point.

Shift4 Price Channel

Verizon Communications and Shift4 Payments Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verizon Communications and Shift4 Payments

The main advantage of trading using opposite Verizon Communications and Shift4 Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Shift4 Payments 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 Shift4 Payments will offset losses from the drop in Shift4 Payments' long position.
Verizon Communications vs. Amazon Inc
The idea behind Verizon Communications and Shift4 Payments 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.
Shift4 Payments vs. Microsoft 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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