Correlation Between Viavi Solutions and Applied Opt
Can any of the company-specific risk be diversified away by investing in both Viavi Solutions and Applied Opt 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 Viavi Solutions and Applied Opt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Viavi Solutions and Applied Opt, you can compare the effects of market volatilities on Viavi Solutions and Applied Opt 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 Viavi Solutions with a short position of Applied Opt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viavi Solutions and Applied Opt.
Diversification Opportunities for Viavi Solutions and Applied Opt
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Viavi and Applied is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Viavi Solutions and Applied Opt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Opt and Viavi Solutions 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 Viavi Solutions are associated (or correlated) with Applied Opt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Opt has no effect on the direction of Viavi Solutions i.e., Viavi Solutions and Applied Opt go up and down completely randomly.
Pair Corralation between Viavi Solutions and Applied Opt
Given the investment horizon of 90 days Viavi Solutions is expected to generate 9.55 times less return on investment than Applied Opt. But when comparing it to its historical volatility, Viavi Solutions is 5.28 times less risky than Applied Opt. It trades about 0.2 of its potential returns per unit of risk. Applied Opt is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,660 in Applied Opt on August 28, 2024 and sell it today you would earn a total of 2,131 from holding Applied Opt or generate 128.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Viavi Solutions vs. Applied Opt
Performance |
| Timeline |
| Viavi Solutions |
| Applied Opt |
Viavi Solutions and Applied Opt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Viavi Solutions and Applied Opt
The main advantage of trading using opposite Viavi Solutions and Applied Opt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Viavi Solutions position performs unexpectedly, Applied Opt 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 Applied Opt will offset losses from the drop in Applied Opt's long position.| Viavi Solutions vs. Ichor Holdings | Viavi Solutions vs. Fabrinet | Viavi Solutions vs. Hello Group | Viavi Solutions vs. Ultra Clean Holdings |
| Applied Opt vs. Lumentum Holdings | Applied Opt vs. Ichor Holdings | Applied Opt vs. Fabrinet | Applied Opt vs. Hello Group |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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