Correlation Between Verizon Communications and DFA INTERNATIONAL

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

Diversification Opportunities for Verizon Communications and DFA INTERNATIONAL

  Correlation Coefficient

Very weak diversification

The 3 months correlation between Verizon and DISVX is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and DFA INTERNATIONAL SMALL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFA INTERNATIONAL SMALL 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 DFA INTERNATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFA INTERNATIONAL SMALL has no effect on the direction of Verizon Communications i.e., Verizon Communications and DFA INTERNATIONAL go up and down completely randomly.

Pair Corralation between Verizon Communications and DFA INTERNATIONAL

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the DFA INTERNATIONAL. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.09 times less risky than DFA INTERNATIONAL. The stock trades about -0.2 of its potential returns per unit of risk. The DFA INTERNATIONAL SMALL is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  2,001  in DFA INTERNATIONAL SMALL on December 23, 2022 and sell it today you would lose (58.00)  from holding DFA INTERNATIONAL SMALL or give up 2.9% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Verizon Communications  vs.  DFA INTERNATIONAL SMALL

 Performance (%) 
Verizon Communications 

Verizon Performance

0 of 100

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

DISVX Performance

5 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in DFA INTERNATIONAL SMALL are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, DFA INTERNATIONAL is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Verizon Communications and DFA INTERNATIONAL Volatility Contrast

   Predicted Return Density   

Pair Trading with Verizon Communications and DFA INTERNATIONAL

The main advantage of trading using opposite Verizon Communications and DFA INTERNATIONAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications position performs unexpectedly, DFA INTERNATIONAL 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 DFA INTERNATIONAL will offset losses from the drop in DFA INTERNATIONAL's long position.
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The idea behind Verizon Communications and DFA INTERNATIONAL SMALL 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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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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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