Correlation Between Verizon Communications and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Verizon Communications and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and STMicroelectronics NV, you can compare the effects of market volatilities on Verizon Communications and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and STMicroelectronics.
Diversification Opportunities for Verizon Communications and STMicroelectronics
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Verizon and STMicroelectronics is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Verizon Communications i.e., Verizon Communications and STMicroelectronics go up and down completely randomly.
Pair Corralation between Verizon Communications and STMicroelectronics
Assuming the 90 days trading horizon Verizon Communications is expected to under-perform the STMicroelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.89 times less risky than STMicroelectronics. The stock trades about -0.46 of its potential returns per unit of risk. The STMicroelectronics NV is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,445 in STMicroelectronics NV on September 25, 2024 and sell it today you would lose (18.00) from holding STMicroelectronics NV or give up 0.74% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Verizon Communications vs. STMicroelectronics NV
Performance |
Timeline |
Verizon Communications |
STMicroelectronics |
Verizon Communications and STMicroelectronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Verizon Communications and STMicroelectronics
The main advantage of trading using opposite Verizon Communications and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.Verizon Communications vs. Auction Technology Group | Verizon Communications vs. L3Harris Technologies | Verizon Communications vs. DXC Technology Co | Verizon Communications vs. Accsys Technologies PLC |
STMicroelectronics vs. Ashtead Technology Holdings | STMicroelectronics vs. Alfa Financial Software | STMicroelectronics vs. Spotify Technology SA | STMicroelectronics vs. Advanced Medical Solutions |
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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
Other Complementary Tools
Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
Money Managers Screen money managers from public funds and ETFs managed around the world | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |