Correlation Between Verizon Communications and GM

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

Diversification Opportunities for Verizon Communications and GM

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Verizon and GM is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Verizon Communications i.e., Verizon Communications and GM go up and down completely randomly.

Pair Corralation between Verizon Communications and GM

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.49 times more return on investment than GM. However, Verizon Communications is 2.02 times less risky than GM. It trades about -0.39 of its potential returns per unit of risk. General Motors is currently generating about -0.24 per unit of risk. If you would invest  4,333  in Verizon Communications on June 30, 2022 and sell it today you would lose (444.00)  from holding Verizon Communications or give up 10.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Verizon Communications  vs.  General Motors

 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 abnormal 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

General Motors 
GM Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, GM may actually be approaching a critical reversion point that can send shares even higher in October 2022.

GM Price Channel

Verizon Communications and GM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verizon Communications and GM

The main advantage of trading using opposite Verizon Communications and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.
Verizon Communications vs. Clearwater Paper Corp
The idea behind Verizon Communications and General Motors 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.
GM vs. Clearwater Paper 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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