Correlation Between Ribbon Communications and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both Ribbon Communications and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ribbon Communications and IMPERIAL TOBACCO , you can compare the effects of market volatilities on Ribbon Communications and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ribbon Communications and IMPERIAL TOBACCO.
Diversification Opportunities for Ribbon Communications and IMPERIAL TOBACCO
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ribbon and IMPERIAL is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of Ribbon Communications i.e., Ribbon Communications and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between Ribbon Communications and IMPERIAL TOBACCO
Assuming the 90 days trading horizon Ribbon Communications is expected to generate 3.25 times more return on investment than IMPERIAL TOBACCO. However, Ribbon Communications is 3.25 times more volatile than IMPERIAL TOBACCO . It trades about 0.03 of its potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.08 per unit of risk. If you would invest 294.00 in Ribbon Communications on October 14, 2024 and sell it today you would earn a total of 84.00 from holding Ribbon Communications or generate 28.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ribbon Communications vs. IMPERIAL TOBACCO
Performance |
| Timeline |
| Ribbon Communications |
| IMPERIAL TOBACCO |
Ribbon Communications and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ribbon Communications and IMPERIAL TOBACCO
The main advantage of trading using opposite Ribbon Communications and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ribbon Communications position performs unexpectedly, IMPERIAL TOBACCO 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 IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.| Ribbon Communications vs. Nippon Telegraph and | Ribbon Communications vs. Superior Plus Corp | Ribbon Communications vs. NMI Holdings | Ribbon Communications vs. SIVERS SEMICONDUCTORS AB |
| IMPERIAL TOBACCO vs. VARIOUS EATERIES LS | IMPERIAL TOBACCO vs. COMPUTERSHARE | IMPERIAL TOBACCO vs. Ribbon Communications | IMPERIAL TOBACCO vs. TELECOM ITALRISP ADR10 |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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