Correlation Between Verizon Communications and AAC Holdings

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

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

Diversification Opportunities for Verizon Communications and AAC Holdings

0.64

Correlation Coefficient

Verizon Communications  AAC Holdings

Poor diversification

The 3 months correlation between Verizon and AAC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and AAC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAC Holdings 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 AAC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAC Holdings has no effect on the direction of Verizon Communications i.e., Verizon Communications and AAC Holdings go up and down completely randomly.

Pair Corralation between Verizon Communications and AAC Holdings

If you would invest  3,906  in Verizon Communications on June 22, 2024 and sell it today you would earn a total of  488.00  from holding Verizon Communications or generate 12.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.96%
Values	Daily Returns

Verizon Communications  vs.  AAC Holdings

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 weak basic indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in October 2024.

AAC Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAC Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AAC Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Verizon Communications and AAC Holdings

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

The idea behind Verizon Communications and AAC Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.