Correlation Between PG E and Ribbon Communications
Can any of the company-specific risk be diversified away by investing in both PG E and Ribbon Communications 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 PG E and Ribbon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PG E P6 and Ribbon Communications, you can compare the effects of market volatilities on PG E and Ribbon Communications 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 PG E with a short position of Ribbon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of PG E and Ribbon Communications.
Diversification Opportunities for PG E and Ribbon Communications
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PCG6 and Ribbon is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding PG E P6 and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications and PG E 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 PG E P6 are associated (or correlated) with Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of PG E i.e., PG E and Ribbon Communications go up and down completely randomly.
Pair Corralation between PG E and Ribbon Communications
Assuming the 90 days trading horizon PG E P6 is expected to generate 0.6 times more return on investment than Ribbon Communications. However, PG E P6 is 1.68 times less risky than Ribbon Communications. It trades about -0.03 of its potential returns per unit of risk. Ribbon Communications is currently generating about -0.11 per unit of risk. If you would invest 2,200 in PG E P6 on September 13, 2024 and sell it today you would lose (20.00) from holding PG E P6 or give up 0.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PG E P6 vs. Ribbon Communications
Performance |
| Timeline |
| PG E P6 |
| Ribbon Communications |
PG E and Ribbon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PG E and Ribbon Communications
The main advantage of trading using opposite PG E and Ribbon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PG E position performs unexpectedly, Ribbon Communications 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 Ribbon Communications will offset losses from the drop in Ribbon Communications' long position.The idea behind PG E P6 and Ribbon Communications 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.| Ribbon Communications vs. Superior Plus Corp | Ribbon Communications vs. SIVERS SEMICONDUCTORS AB | Ribbon Communications vs. Norsk Hydro ASA | Ribbon Communications vs. Reliance Steel Aluminum |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Stocks Directory Find actively traded stocks across global markets | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |