Correlation Between Verizon Communications and Total Stock

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Total Stock 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 Total Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Total Stock Market, you can compare the effects of market volatilities on Verizon Communications and Total Stock 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 Total Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Total Stock.

Diversification Opportunities for Verizon Communications and Total Stock

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Verizon and Total is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Total Stock Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Stock Market 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 Total Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Stock Market has no effect on the direction of Verizon Communications i.e., Verizon Communications and Total Stock go up and down completely randomly.

Pair Corralation between Verizon Communications and Total Stock

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Total Stock. In addition to that, Verizon Communications is 1.01 times more volatile than Total Stock Market. It trades about -0.21 of its total potential returns per unit of risk. Total Stock Market is currently generating about -0.14 per unit of volatility. If you would invest  19,869  in Total Stock Market on July 9, 2022 and sell it today you would lose (1,092)  from holding Total Stock Market or give up 5.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Verizon Communications  vs.  Total Stock Market

 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 November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Verizon Price Channel

Total Stock Market 
Total Performance
0 of 100
Over the last 90 days Total Stock Market has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Total Stock is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Total Price Channel

Verizon Communications and Total Stock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verizon Communications and Total Stock

The main advantage of trading using opposite Verizon Communications and Total Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, Total Stock 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 Total Stock will offset losses from the drop in Total Stock's long position.
Verizon Communications vs. Amazon Inc
The idea behind Verizon Communications and Total Stock Market 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Total Stock as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Total Stock's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Total Stock's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Total Stock Market.
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 Bond Directory module to find actively traded corporate debentures issued by US companies.

Other Complementary Tools

Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Go
CEO Directory
Screen CEOs from public companies around the world
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go
CEO Directory
Screen CEOs from public companies around the world
Go
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Go
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Go
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Go
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Go
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Go
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum
Go
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go