Correlation Between Credo Technology and ADTRAN
Can any of the company-specific risk be diversified away by investing in both Credo Technology and ADTRAN 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 Credo Technology and ADTRAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Credo Technology Group and ADTRAN Inc, you can compare the effects of market volatilities on Credo Technology and ADTRAN 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 Credo Technology with a short position of ADTRAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credo Technology and ADTRAN.
Diversification Opportunities for Credo Technology and ADTRAN
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Credo and ADTRAN is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Credo Technology Group and ADTRAN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADTRAN Inc and Credo Technology 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 Credo Technology Group are associated (or correlated) with ADTRAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADTRAN Inc has no effect on the direction of Credo Technology i.e., Credo Technology and ADTRAN go up and down completely randomly.
Pair Corralation between Credo Technology and ADTRAN
Given the investment horizon of 90 days Credo Technology Group is expected to generate 1.22 times more return on investment than ADTRAN. However, Credo Technology is 1.22 times more volatile than ADTRAN Inc. It trades about 0.08 of its potential returns per unit of risk. ADTRAN Inc is currently generating about -0.03 per unit of risk. If you would invest 1,469 in Credo Technology Group on August 27, 2024 and sell it today you would earn a total of 3,115 from holding Credo Technology Group or generate 212.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Credo Technology Group vs. ADTRAN Inc
Performance |
| Timeline |
| Credo Technology |
| ADTRAN Inc |
Credo Technology and ADTRAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Credo Technology and ADTRAN
The main advantage of trading using opposite Credo Technology and ADTRAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credo Technology position performs unexpectedly, ADTRAN 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 ADTRAN will offset losses from the drop in ADTRAN's long position.| Credo Technology vs. Zebra Technologies | Credo Technology vs. Ubiquiti Networks | Credo Technology vs. Ciena Corp | Credo Technology vs. Clearfield |
| ADTRAN vs. Mynaric AG ADR | ADTRAN vs. KVH Industries | ADTRAN vs. Telesat Corp | ADTRAN vs. Digi International |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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