Correlation Between Applied Opt and Infinera

Can any of the company-specific risk be diversified away by investing in both Applied Opt and Infinera 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 Applied Opt and Infinera into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Applied Opt and Infinera, you can compare the effects of market volatilities on Applied Opt and Infinera 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 Applied Opt with a short position of Infinera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Opt and Infinera.

Diversification Opportunities for Applied Opt and Infinera

-0.37

Correlation Coefficient

Applied Opt  Infinera

Very good diversification

The 3 months correlation between Applied and Infinera is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Applied Opt and Infinera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinera and Applied Opt 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 Applied Opt are associated (or correlated) with Infinera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinera has no effect on the direction of Applied Opt i.e., Applied Opt and Infinera go up and down completely randomly.

Pair Corralation between Applied Opt and Infinera

Given the investment horizon of 90 days Applied Opt is expected to under-perform the Infinera. In addition to that, Applied Opt is 24.21 times more volatile than Infinera. It trades about -0.08 of its total potential returns per unit of risk. Infinera is currently generating about 0.03 per unit of volatility. If you would invest  661.00  in Infinera on November 29, 2024 and sell it today you would earn a total of  3.00  from holding Infinera or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Applied Opt  vs.  Infinera

Applied Opt

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Opt has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Infinera

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Infinera are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Infinera is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Applied Opt and Infinera

The main advantage of trading using opposite Applied Opt and Infinera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Opt position performs unexpectedly, Infinera 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 Infinera will offset losses from the drop in Infinera's long position.

The idea behind Applied Opt and Infinera 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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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.