Correlation Between Verizon Communications and Liberty Global

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

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

Diversification Opportunities for Verizon Communications and Liberty Global

0.49

Correlation Coefficient

Verizon Communications  Liberty Global

Very weak diversification

The 3 months correlation between Verizon and Liberty is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Liberty Global PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Global PLC 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 Liberty Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Global PLC has no effect on the direction of Verizon Communications i.e., Verizon Communications and Liberty Global go up and down completely randomly.

Pair Corralation between Verizon Communications and Liberty Global

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.16 times more return on investment than Liberty Global. However, Verizon Communications is 6.21 times less risky than Liberty Global. It trades about -0.14 of its potential returns per unit of risk. Liberty Global PLC is currently generating about -0.16 per unit of risk. If you would invest  4,399  in Verizon Communications on August 19, 2024 and sell it today you would lose (234.00) from holding Verizon Communications or give up 5.32% of portfolio value over 90 days.

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

Verizon Communications  vs.  Liberty Global PLC

Verizon Communications

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Liberty Global PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Global PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Verizon Communications and Liberty Global

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

The idea behind Verizon Communications and Liberty Global PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.