Correlation Between Verizon Communications and Pentagon I

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

Diversification Opportunities for Verizon Communications and Pentagon I

0.37

Correlation Coefficient

Verizon Communications  Pentagon I

Weak diversification

The 3 months correlation between Verizon and Pentagon is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications CDR and Pentagon I Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentagon I Capital 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 Pentagon I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentagon I Capital has no effect on the direction of Verizon Communications i.e., Verizon Communications and Pentagon I go up and down completely randomly.

Pair Corralation between Verizon Communications and Pentagon I

Assuming the 90 days trading horizon Verizon Communications CDR is expected to generate 0.16 times more return on investment than Pentagon I. However, Verizon Communications CDR is 6.34 times less risky than Pentagon I. It trades about -0.1 of its potential returns per unit of risk. Pentagon I Capital is currently generating about -0.1 per unit of risk. If you would invest  1,912  in Verizon Communications CDR on September 23, 2024 and sell it today you would lose (160.00) from holding Verizon Communications CDR or give up 8.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Verizon Communications CDR  vs.  Pentagon I Capital

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.

Pentagon I Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Verizon Communications and Pentagon I

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

The idea behind Verizon Communications CDR and Pentagon I Capital 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.