Correlation Between Applied Opt and Viavi Solutions

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

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

Diversification Opportunities for Applied Opt and Viavi Solutions

-0.31

Correlation Coefficient

Applied Opt  Viavi Solutions

Very good diversification

The 3 months correlation between Applied and Viavi is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Applied Opt and Viavi Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viavi Solutions 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 Viavi Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viavi Solutions has no effect on the direction of Applied Opt i.e., Applied Opt and Viavi Solutions go up and down completely randomly.

Pair Corralation between Applied Opt and Viavi Solutions

Given the investment horizon of 90 days Applied Opt is expected to under-perform the Viavi Solutions. In addition to that, Applied Opt is 2.83 times more volatile than Viavi Solutions. It trades about -0.1 of its total potential returns per unit of risk. Viavi Solutions is currently generating about 0.07 per unit of volatility. If you would invest  1,008  in Viavi Solutions on December 29, 2024 and sell it today you would earn a total of  118.00  from holding Viavi Solutions or generate 11.71% 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.  Viavi Solutions

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 April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Viavi Solutions

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viavi Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Viavi Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Opt and Viavi Solutions

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

The idea behind Applied Opt and Viavi Solutions 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.