Correlation Between Verizon Communications and LLOYDS

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

By analyzing existing cross correlation between Verizon Communications and LLOYDS 8, you can compare the effects of market volatilities on Verizon Communications and LLOYDS 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 LLOYDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and LLOYDS.

Diversification Opportunities for Verizon Communications and LLOYDS

-0.44

Correlation Coefficient

Verizon Communications  LLOYDS

Very good diversification

The 3 months correlation between Verizon and LLOYDS is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and LLOYDS 8 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LLOYDS 8 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 LLOYDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LLOYDS 8 has no effect on the direction of Verizon Communications i.e., Verizon Communications and LLOYDS go up and down completely randomly.

Pair Corralation between Verizon Communications and LLOYDS

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.94 times more return on investment than LLOYDS. However, Verizon Communications is 1.06 times less risky than LLOYDS. It trades about 0.06 of its potential returns per unit of risk. LLOYDS 8 is currently generating about 0.02 per unit of risk. If you would invest  3,532  in Verizon Communications on September 12, 2024 and sell it today you would earn a total of  667.00  from holding Verizon Communications or generate 18.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.65%
Values	Daily Returns

Verizon Communications  vs.  LLOYDS 8

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.

LLOYDS 8

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LLOYDS 8 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LLOYDS 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 LLOYDS

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

The idea behind Verizon Communications and LLOYDS 8 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..