Correlation Between Consolidated Communications and Verizon Communications

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

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

Diversification Opportunities for Consolidated Communications and Verizon Communications

-0.3

Correlation Coefficient

Consolidated Communications  Verizon Communications

Very good diversification

The 3 months correlation between Consolidated and Verizon is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Consolidated 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 Consolidated Communications are associated (or correlated) with Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Consolidated Communications i.e., Consolidated Communications and Verizon Communications go up and down completely randomly.

Pair Corralation between Consolidated Communications and Verizon Communications

Given the investment horizon of 90 days Consolidated Communications is expected to under-perform the Verizon Communications. But the stock apears to be less risky and, when comparing its historical volatility, Consolidated Communications is 2.23 times less risky than Verizon Communications. The stock trades about -0.06 of its potential returns per unit of risk. The Verizon Communications is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,929  in Verizon Communications on January 17, 2024 and sell it today you would earn a total of  82.00  from holding Verizon Communications or generate 2.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Consolidated Communications  vs.  Verizon Communications

Consolidated Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consolidated Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Consolidated Communications is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Verizon Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 5 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Consolidated Communications and Verizon Communications

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

The idea behind Consolidated Communications and Verizon Communications 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 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.