Correlation Between Verizon Communications and Qwest Corp

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

By analyzing existing cross correlation between Verizon Communications and Qwest Corp 6, you can compare the effects of market volatilities on Verizon Communications and Qwest Corp 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 Qwest Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Qwest Corp.

Diversification Opportunities for Verizon Communications and Qwest Corp

-0.41

Correlation Coefficient

Verizon Communications  Qwest Corp

Very good diversification

The 3 months correlation between Verizon and Qwest is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Qwest Corp 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qwest Corp 6 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 Qwest Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qwest Corp 6 has no effect on the direction of Verizon Communications i.e., Verizon Communications and Qwest Corp go up and down completely randomly.

Pair Corralation between Verizon Communications and Qwest Corp

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the Qwest Corp. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.18 times less risky than Qwest Corp. The stock trades about -0.1 of its potential returns per unit of risk. The Qwest Corp 6 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,743  in Qwest Corp 6 on September 19, 2024 and sell it today you would earn a total of  7.00  from holding Qwest Corp 6 or generate 0.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Verizon Communications  vs.  Qwest Corp 6

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Qwest Corp 6

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qwest Corp 6 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Qwest Corp is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Verizon Communications and Qwest Corp

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

The idea behind Verizon Communications and Qwest Corp 6 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.