Correlation Between ADTRAN and CommScope Holding

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

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

Diversification Opportunities for ADTRAN and CommScope Holding

0.01

Correlation Coefficient

ADTRAN  CommScope Holding

Significant diversification

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

Pair Corralation between ADTRAN and CommScope Holding

Given the investment horizon of 90 days ADTRAN Inc is expected to generate 0.69 times more return on investment than CommScope Holding. However, ADTRAN Inc is 1.45 times less risky than CommScope Holding. It trades about 0.05 of its potential returns per unit of risk. CommScope Holding Co 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

ADTRAN Inc  vs.  CommScope Holding Co

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.

CommScope Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CommScope Holding Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, CommScope Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ADTRAN and CommScope Holding

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

The idea behind ADTRAN Inc and CommScope Holding Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.