Correlation Between Oi SA and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both Oi SA 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 Oi SA and Verizon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oi SA and Verizon Communications, you can compare the effects of market volatilities on Oi SA 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 Oi SA with a short position of Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oi SA and Verizon Communications.
Diversification Opportunities for Oi SA and Verizon Communications
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between OIBR3 and Verizon is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Oi SA and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Oi SA 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 Oi SA 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 Oi SA i.e., Oi SA and Verizon Communications go up and down completely randomly.
Pair Corralation between Oi SA and Verizon Communications
Assuming the 90 days trading horizon Oi SA is expected to generate 1.46 times more return on investment than Verizon Communications. However, Oi SA is 1.46 times more volatile than Verizon Communications. It trades about 0.28 of its potential returns per unit of risk. Verizon Communications is currently generating about -0.13 per unit of risk. If you would invest 64.00 in Oi SA on February 7, 2024 and sell it today you would earn a total of 9.00 from holding Oi SA or generate 14.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Oi SA vs. Verizon Communications
Performance |
Timeline |
Oi SA |
Verizon Communications |
Oi SA and Verizon Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Oi SA and Verizon Communications
The main advantage of trading using opposite Oi SA and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oi SA 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.Oi SA vs. IRB Brasil Resseguros SA | Oi SA vs. Magazine Luiza SA | Oi SA vs. Cogna Educao SA | Oi SA vs. Oi SA |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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