Correlation Between ADTRAN and AudioCodes

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

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

Diversification Opportunities for ADTRAN and AudioCodes

0.83

Correlation Coefficient

ADTRAN  AudioCodes

Very poor diversification

The 3 months correlation between ADTRAN and AudioCodes is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ADTRAN Inc and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes 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 AudioCodes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioCodes has no effect on the direction of ADTRAN i.e., ADTRAN and AudioCodes go up and down completely randomly.

Pair Corralation between ADTRAN and AudioCodes

Given the investment horizon of 90 days ADTRAN Inc is expected to generate 1.42 times more return on investment than AudioCodes. However, ADTRAN is 1.42 times more volatile than AudioCodes. It trades about 0.05 of its potential returns per unit of risk. AudioCodes is currently generating about 0.03 per unit of risk. If you would invest  830.00  in ADTRAN Inc on December 30, 2024 and sell it today you would earn a total of  60.00  from holding ADTRAN Inc or generate 7.23% return on investment over 90 days.

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

ADTRAN Inc  vs.  AudioCodes

ADTRAN Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ADTRAN Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, ADTRAN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AudioCodes

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AudioCodes are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, AudioCodes is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ADTRAN and AudioCodes

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

The idea behind ADTRAN Inc and AudioCodes 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.