Correlation Between Livetech and Arista Networks
Can any of the company-specific risk be diversified away by investing in both Livetech and Arista Networks 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 Livetech and Arista Networks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Livetech da Bahia and Arista Networks, you can compare the effects of market volatilities on Livetech and Arista Networks 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 Livetech with a short position of Arista Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Livetech and Arista Networks.
Diversification Opportunities for Livetech and Arista Networks
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Livetech and Arista is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Livetech da Bahia and Arista Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arista Networks and Livetech 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 Livetech da Bahia are associated (or correlated) with Arista Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arista Networks has no effect on the direction of Livetech i.e., Livetech and Arista Networks go up and down completely randomly.
Pair Corralation between Livetech and Arista Networks
Assuming the 90 days trading horizon Livetech da Bahia is expected to under-perform the Arista Networks. But the stock apears to be less risky and, when comparing its historical volatility, Livetech da Bahia is 2.75 times less risky than Arista Networks. The stock trades about -1.02 of its potential returns per unit of risk. The Arista Networks is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 14,407 in Arista Networks on September 14, 2024 and sell it today you would earn a total of 1,602 from holding Arista Networks or generate 11.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Livetech da Bahia vs. Arista Networks
Performance |
| Timeline |
| Livetech da Bahia |
| Arista Networks |
Livetech and Arista Networks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Livetech and Arista Networks
The main advantage of trading using opposite Livetech and Arista Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Livetech position performs unexpectedly, Arista Networks 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 Arista Networks will offset losses from the drop in Arista Networks' long position.| Livetech vs. T Mobile | Livetech vs. Verizon Communications | Livetech vs. Vodafone Group Public | Livetech vs. Fundo Investimento Imobiliario |
| Arista Networks vs. Uber Technologies | Arista Networks vs. Lupatech SA | Arista Networks vs. Costco Wholesale | Arista Networks vs. Micron Technology |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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