Correlation Between Verizon Communications and Sun Art

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

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

Diversification Opportunities for Verizon Communications and Sun Art

0.12

Correlation Coefficient

Verizon Communications  Sun Art

Average diversification

The 3 months correlation between Verizon and Sun is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Sun Art Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Art Retail 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 Sun Art. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Art Retail has no effect on the direction of Verizon Communications i.e., Verizon Communications and Sun Art go up and down completely randomly.

Pair Corralation between Verizon Communications and Sun Art

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.28 times more return on investment than Sun Art. However, Verizon Communications is 3.55 times less risky than Sun Art. It trades about 0.04 of its potential returns per unit of risk. Sun Art Retail is currently generating about 0.01 per unit of risk. If you would invest  3,326  in Verizon Communications on January 30, 2024 and sell it today you would earn a total of  642.00  from holding Verizon Communications or generate 19.3% 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.  Sun Art Retail

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.

Sun Art Retail

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Art Retail are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Sun Art showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Verizon Communications and Sun Art

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

The idea behind Verizon Communications and Sun Art Retail 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.