Correlation Between Verizon Communications and LOCKHEED

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

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

Diversification Opportunities for Verizon Communications and LOCKHEED

0.63

Correlation Coefficient

Verizon Communications  LOCKHEED

Poor diversification

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

Pair Corralation between Verizon Communications and LOCKHEED

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 1.3 times more return on investment than LOCKHEED. However, Verizon Communications is 1.3 times more volatile than LOCKHEED MARTIN PORATION. It trades about -0.05 of its potential returns per unit of risk. LOCKHEED MARTIN PORATION is currently generating about -0.19 per unit of risk. If you would invest  4,431  in Verizon Communications on September 15, 2024 and sell it today you would lose (203.00) from holding Verizon Communications or give up 4.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.06%
Values	Daily Returns

Verizon Communications  vs.  LOCKHEED MARTIN PORATION

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.

LOCKHEED MARTIN PORATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOCKHEED MARTIN PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for LOCKHEED MARTIN PORATION investors.

Pair Trading with Verizon Communications and LOCKHEED

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

The idea behind Verizon Communications and LOCKHEED MARTIN PORATION 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.