Correlation Between Verizon Communications and IShares ESG

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

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

Diversification Opportunities for Verizon Communications and IShares ESG

0.04

Correlation Coefficient

Verizon Communications  IShares ESG

Significant diversification

The 3 months correlation between Verizon and IShares is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware 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 IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Aware has no effect on the direction of Verizon Communications i.e., Verizon Communications and IShares ESG go up and down completely randomly.

Pair Corralation between Verizon Communications and IShares ESG

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the IShares ESG. In addition to that, Verizon Communications is 2.49 times more volatile than iShares ESG Aware. It trades about -0.02 of its total potential returns per unit of risk. iShares ESG Aware is currently generating about 0.13 per unit of volatility. If you would invest  3,549  in iShares ESG Aware on September 12, 2024 and sell it today you would earn a total of  151.00  from holding iShares ESG Aware or generate 4.25% return on investment over 90 days.

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

Verizon Communications  vs.  iShares ESG Aware

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.

iShares ESG Aware

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Verizon Communications and IShares ESG

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

The idea behind Verizon Communications and iShares ESG Aware 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.