Correlation Between ADTRAN and Color Star

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

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

Diversification Opportunities for ADTRAN and Color Star

-0.01

Correlation Coefficient

ADTRAN  Color Star

Good diversification

The 3 months correlation between ADTRAN and Color is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding ADTRAN Inc and Color Star Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Color Star Technology and ADTRAN 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 ADTRAN Inc are associated (or correlated) with Color Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Color Star Technology has no effect on the direction of ADTRAN i.e., ADTRAN and Color Star go up and down completely randomly.

Pair Corralation between ADTRAN and Color Star

Given the investment horizon of 90 days ADTRAN Inc is expected to generate 0.67 times more return on investment than Color Star. However, ADTRAN Inc is 1.49 times less risky than Color Star. It trades about 0.07 of its potential returns per unit of risk. Color Star Technology is currently generating about -0.24 per unit of risk. If you would invest  830.00  in ADTRAN Inc on December 28, 2024 and sell it today you would earn a total of  94.00  from holding ADTRAN Inc or generate 11.33% return on investment over 90 days.

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

ADTRAN Inc  vs.  Color Star Technology

ADTRAN Inc

Risk-Adjusted Performance

Modest

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

Color Star Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Color Star Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ADTRAN and Color Star

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

The idea behind ADTRAN Inc and Color Star Technology 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.