Correlation Between Ribbon Communications and ELECTROLUX
Can any of the company-specific risk be diversified away by investing in both Ribbon Communications and ELECTROLUX 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 Ribbon Communications and ELECTROLUX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ribbon Communications and ELECTROLUX B ADR2, you can compare the effects of market volatilities on Ribbon Communications and ELECTROLUX 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 Ribbon Communications with a short position of ELECTROLUX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ribbon Communications and ELECTROLUX.
Diversification Opportunities for Ribbon Communications and ELECTROLUX
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Ribbon and ELECTROLUX is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and ELECTROLUX B ADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTROLUX B ADR2 and Ribbon 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 Ribbon Communications are associated (or correlated) with ELECTROLUX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECTROLUX B ADR2 has no effect on the direction of Ribbon Communications i.e., Ribbon Communications and ELECTROLUX go up and down completely randomly.
Pair Corralation between Ribbon Communications and ELECTROLUX
Assuming the 90 days trading horizon Ribbon Communications is expected to generate 1.37 times more return on investment than ELECTROLUX. However, Ribbon Communications is 1.37 times more volatile than ELECTROLUX B ADR2. It trades about 0.09 of its potential returns per unit of risk. ELECTROLUX B ADR2 is currently generating about -0.03 per unit of risk. If you would invest 272.00 in Ribbon Communications on September 5, 2024 and sell it today you would earn a total of 100.00 from holding Ribbon Communications or generate 36.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
Ribbon Communications vs. ELECTROLUX B ADR2
Performance |
| Timeline |
| Ribbon Communications |
| ELECTROLUX B ADR2 |
Ribbon Communications and ELECTROLUX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ribbon Communications and ELECTROLUX
The main advantage of trading using opposite Ribbon Communications and ELECTROLUX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ribbon Communications position performs unexpectedly, ELECTROLUX 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 ELECTROLUX will offset losses from the drop in ELECTROLUX's long position.The idea behind Ribbon Communications and ELECTROLUX B ADR2 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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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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