Correlation Between VeriSign and Toast

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

By analyzing existing cross correlation between VeriSign and Toast Inc, you can compare the effects of market volatilities on VeriSign and Toast 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 VeriSign with a short position of Toast. Check out your portfolio center. Please also check ongoing floating volatility patterns of VeriSign and Toast.

Diversification Opportunities for VeriSign and Toast

0.2

Correlation Coefficient

VeriSign  Toast

Modest diversification

The 3 months correlation between VeriSign and Toast is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and Toast Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toast Inc and VeriSign 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 VeriSign are associated (or correlated) with Toast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toast Inc has no effect on the direction of VeriSign i.e., VeriSign and Toast go up and down completely randomly.

Pair Corralation between VeriSign and Toast

Given the investment horizon of 90 days VeriSign is expected to under-perform the Toast. But the stock apears to be less risky and, when comparing its historical volatility, VeriSign is 1.37 times less risky than Toast. The stock trades about -0.05 of its potential returns per unit of risk. The Toast Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,584  in Toast Inc on May 4, 2025 and sell it today you would earn a total of  1,082  from holding Toast Inc or generate 30.19% return on investment over 90 days.

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

VeriSign  vs.  Toast Inc

VeriSign

Risk-Adjusted Performance

Very Weak

Over the last 90 days VeriSign has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, VeriSign is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Toast Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Toast Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Toast unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VeriSign and Toast

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

The idea behind VeriSign and Toast Inc 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.