Correlation Between VeriSign and EchoStar

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

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

Diversification Opportunities for VeriSign and EchoStar

-0.07

Correlation Coefficient

VeriSign  EchoStar

Good diversification

The 3 months correlation between VeriSign and EchoStar is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and EchoStar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EchoStar 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 EchoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EchoStar has no effect on the direction of VeriSign i.e., VeriSign and EchoStar go up and down completely randomly.

Pair Corralation between VeriSign and EchoStar

Given the investment horizon of 90 days VeriSign is expected to generate 0.4 times more return on investment than EchoStar. However, VeriSign is 2.49 times less risky than EchoStar. It trades about 0.01 of its potential returns per unit of risk. EchoStar is currently generating about -0.01 per unit of risk. If you would invest  17,776  in VeriSign on January 25, 2024 and sell it today you would earn a total of  762.00  from holding VeriSign or generate 4.29% return on investment over 90 days.

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

VeriSign  vs.  EchoStar

VeriSign

Risk-Adjusted Performance

0 of 100

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 latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

EchoStar

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, EchoStar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VeriSign and EchoStar

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

The idea behind VeriSign and EchoStar 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.