Correlation Between Infinera and EchoStar
Can any of the company-specific risk be diversified away by investing in both Infinera 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 Infinera and EchoStar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Infinera and EchoStar, you can compare the effects of market volatilities on Infinera 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 Infinera with a short position of EchoStar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infinera and EchoStar.
Diversification Opportunities for Infinera and EchoStar
Very poor diversification
The 3 months correlation between Infinera and EchoStar is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Infinera and EchoStar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EchoStar and Infinera 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 Infinera 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 Infinera i.e., Infinera and EchoStar go up and down completely randomly.
Pair Corralation between Infinera and EchoStar
Given the investment horizon of 90 days Infinera is expected to under-perform the EchoStar. But the stock apears to be less risky and, when comparing its historical volatility, Infinera is 14.01 times less risky than EchoStar. The stock trades about -0.26 of its potential returns per unit of risk. The EchoStar is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 2,528 in EchoStar on August 28, 2024 and sell it today you would lose (87.00) from holding EchoStar or give up 3.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Infinera vs. EchoStar
Performance |
| Timeline |
| Infinera |
| EchoStar |
Infinera and EchoStar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Infinera and EchoStar
The main advantage of trading using opposite Infinera and EchoStar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infinera 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.| Infinera vs. Ichor Holdings | Infinera vs. Fabrinet | Infinera vs. Hello Group | Infinera vs. Ultra Clean Holdings |
| EchoStar vs. ADTRAN Inc | EchoStar vs. Mynaric AG ADR | EchoStar vs. KVH Industries | EchoStar vs. Telesat Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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