Correlation Between Verizon Communications and AST SpaceMobile

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

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

Diversification Opportunities for Verizon Communications and AST SpaceMobile

-0.63

Correlation Coefficient

Verizon Communications  AST SpaceMobile

Excellent diversification

The 3 months correlation between Verizon and AST is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and AST SpaceMobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AST SpaceMobile 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 AST SpaceMobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AST SpaceMobile has no effect on the direction of Verizon Communications i.e., Verizon Communications and AST SpaceMobile go up and down completely randomly.

Pair Corralation between Verizon Communications and AST SpaceMobile

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.14 times more return on investment than AST SpaceMobile. However, Verizon Communications is 7.17 times less risky than AST SpaceMobile. It trades about -0.02 of its potential returns per unit of risk. AST SpaceMobile is currently generating about -0.05 per unit of risk. If you would invest  4,319  in Verizon Communications on September 12, 2024 and sell it today you would lose (89.00) from holding Verizon Communications or give up 2.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	20.63%
Values	Daily Returns

Verizon Communications  vs.  AST SpaceMobile

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

AST SpaceMobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AST SpaceMobile has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Verizon Communications and AST SpaceMobile

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

The idea behind Verizon Communications and AST SpaceMobile 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.