Correlation Between Verizon Communications and Kinetics Paradigm

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

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

Diversification Opportunities for Verizon Communications and Kinetics Paradigm

-0.16

Correlation Coefficient

Verizon Communications  Kinetics Paradigm

Good diversification

The 3 months correlation between Verizon and Kinetics is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Kinetics Paradigm Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetics Paradigm 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 Kinetics Paradigm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetics Paradigm has no effect on the direction of Verizon Communications i.e., Verizon Communications and Kinetics Paradigm go up and down completely randomly.

Pair Corralation between Verizon Communications and Kinetics Paradigm

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 6.65 times less return on investment than Kinetics Paradigm. But when comparing it to its historical volatility, Verizon Communications is 1.65 times less risky than Kinetics Paradigm. It trades about 0.09 of its potential returns per unit of risk. Kinetics Paradigm Fund is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  9,230  in Kinetics Paradigm Fund on August 30, 2024 and sell it today you would earn a total of  6,540  from holding Kinetics Paradigm Fund or generate 70.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Verizon Communications  vs.  Kinetics Paradigm Fund

Verizon Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Kinetics Paradigm

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetics Paradigm Fund are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Kinetics Paradigm showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verizon Communications and Kinetics Paradigm

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

The idea behind Verizon Communications and Kinetics Paradigm Fund 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.