Correlation Between Verizon Communications and Thermo Fisher

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

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

Diversification Opportunities for Verizon Communications and Thermo Fisher

-0.44

Correlation Coefficient

Verizon Communications  Thermo Fisher

Very good diversification

The 3 months correlation between Verizon and Thermo is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Thermo Fisher Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermo Fisher Scientific 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 Thermo Fisher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermo Fisher Scientific has no effect on the direction of Verizon Communications i.e., Verizon Communications and Thermo Fisher go up and down completely randomly.

Pair Corralation between Verizon Communications and Thermo Fisher

Assuming the 90 days horizon Verizon Communications is expected to under-perform the Thermo Fisher. In addition to that, Verizon Communications is 1.43 times more volatile than Thermo Fisher Scientific. It trades about -0.04 of its total potential returns per unit of risk. Thermo Fisher Scientific is currently generating about -0.01 per unit of volatility. If you would invest  983,700  in Thermo Fisher Scientific on February 26, 2024 and sell it today you would lose (2,759) from holding Thermo Fisher Scientific or give up 0.28% of portfolio value over 90 days.

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

Verizon Communications  vs.  Thermo Fisher Scientific

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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 primary indicators, Verizon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Thermo Fisher Scientific

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thermo Fisher Scientific are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Thermo Fisher is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Verizon Communications and Thermo Fisher

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

The idea behind Verizon Communications and Thermo Fisher Scientific 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.