Correlation Between Verizon Communications and Highwood Asset

Can any of the company-specific risk be diversified away by investing in both Verizon Communications and Highwood Asset 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 Highwood Asset 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 Highwood Asset Management, you can compare the effects of market volatilities on Verizon Communications and Highwood Asset 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 Highwood Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Highwood Asset.

Diversification Opportunities for Verizon Communications and Highwood Asset

-0.01

Correlation Coefficient

Verizon Communications  Highwood Asset

Good diversification

The 3 months correlation between Verizon and Highwood is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications CDR and Highwood Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highwood Asset Management 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 Highwood Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highwood Asset Management has no effect on the direction of Verizon Communications i.e., Verizon Communications and Highwood Asset go up and down completely randomly.

Pair Corralation between Verizon Communications and Highwood Asset

Assuming the 90 days trading horizon Verizon Communications CDR is expected to generate 0.54 times more return on investment than Highwood Asset. However, Verizon Communications CDR is 1.87 times less risky than Highwood Asset. It trades about 0.28 of its potential returns per unit of risk. Highwood Asset Management is currently generating about -0.01 per unit of risk. If you would invest  1,798  in Verizon Communications CDR on September 4, 2024 and sell it today you would earn a total of  121.00  from holding Verizon Communications CDR or generate 6.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Verizon Communications CDR  vs.  Highwood Asset Management

Verizon Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications CDR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Highwood Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highwood Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Highwood Asset is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Verizon Communications and Highwood Asset

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

The idea behind Verizon Communications CDR and Highwood Asset Management 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.