Correlation Between Verizon Communications and Nicola Mining

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

Diversification Opportunities for Verizon Communications and Nicola Mining

0.29

Correlation Coefficient

Verizon Communications  Nicola Mining

Modest diversification

The 3 months correlation between Verizon and Nicola is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications CDR and Nicola Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicola Mining 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 Nicola Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicola Mining has no effect on the direction of Verizon Communications i.e., Verizon Communications and Nicola Mining go up and down completely randomly.

Pair Corralation between Verizon Communications and Nicola Mining

Assuming the 90 days trading horizon Verizon Communications CDR is expected to generate 0.27 times more return on investment than Nicola Mining. However, Verizon Communications CDR is 3.65 times less risky than Nicola Mining. It trades about -0.11 of its potential returns per unit of risk. Nicola Mining is currently generating about -0.03 per unit of risk. If you would invest  1,928  in Verizon Communications CDR on September 24, 2024 and sell it today you would lose (176.00) from holding Verizon Communications CDR or give up 9.13% 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 CDR  vs.  Nicola Mining

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Nicola Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nicola Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Verizon Communications and Nicola Mining

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

The idea behind Verizon Communications CDR and Nicola Mining 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.