Correlation Between United Parcel and Verizon Communications

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Can any of the company-specific risk be diversified away by investing in both United Parcel 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 United Parcel and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Parcel Service and Verizon Communications, you can compare the effects of market volatilities on United Parcel 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 United Parcel with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and Verizon Communications.

Diversification Opportunities for United Parcel and Verizon Communications

-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between United and Verizon is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and Verizon Communications go up and down completely randomly.

Pair Corralation between United Parcel and Verizon Communications

Considering the 90-day investment horizon United Parcel Service is expected to under-perform the Verizon Communications. In addition to that, United Parcel is 2.59 times more volatile than Verizon Communications. It trades about 0.0 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.23 per unit of volatility. If you would invest  3,993  in Verizon Communications on December 29, 2023 and sell it today you would earn a total of  161.00  from holding Verizon Communications or generate 4.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

United Parcel Service  vs.  Verizon Communications

 Performance 
       Timeline  
United Parcel Service 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, United Parcel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Verizon Communications 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in April 2024.

United Parcel and Verizon Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Parcel and Verizon Communications

The main advantage of trading using opposite United Parcel and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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 United Parcel Service 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.
Check out your portfolio center.
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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