Correlation Between Verizon Communications and Altagas

Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Altagas 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 Altagas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Verizon Communications CDR and Altagas Ltd Pref, you can compare the effects of market volatilities on Verizon Communications and Altagas 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 Altagas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Altagas.

Diversification Opportunities for Verizon Communications and Altagas

0.35

Correlation Coefficient

Verizon Communications  Altagas

Weak diversification

The 3 months correlation between Verizon and Altagas is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications CDR and Altagas Ltd Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altagas Pref 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 CDR are associated (or correlated) with Altagas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altagas Pref has no effect on the direction of Verizon Communications i.e., Verizon Communications and Altagas go up and down completely randomly.

Pair Corralation between Verizon Communications and Altagas

Assuming the 90 days trading horizon Verizon Communications CDR is expected to under-perform the Altagas. In addition to that, Verizon Communications is 2.36 times more volatile than Altagas Ltd Pref. It trades about -0.02 of its total potential returns per unit of risk. Altagas Ltd Pref is currently generating about 0.13 per unit of volatility. If you would invest  2,234  in Altagas Ltd Pref on September 12, 2024 and sell it today you would earn a total of  102.00  from holding Altagas Ltd Pref or generate 4.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Verizon Communications CDR  vs.  Altagas Ltd Pref

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Verizon Communications is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Altagas Pref

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altagas Ltd Pref are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Altagas is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Verizon Communications and Altagas

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

The idea behind Verizon Communications CDR and Altagas Ltd Pref 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.