Correlation Between ADTRAN and Harmonic

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

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

Diversification Opportunities for ADTRAN and Harmonic

-0.34

Correlation Coefficient

ADTRAN  Harmonic

Very good diversification

The 3 months correlation between ADTRAN and Harmonic is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ADTRAN Inc and Harmonic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmonic 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 Harmonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmonic has no effect on the direction of ADTRAN i.e., ADTRAN and Harmonic go up and down completely randomly.

Pair Corralation between ADTRAN and Harmonic

Given the investment horizon of 90 days ADTRAN Inc is expected to generate 1.31 times more return on investment than Harmonic. However, ADTRAN is 1.31 times more volatile than Harmonic. It trades about 0.05 of its potential returns per unit of risk. Harmonic is currently generating about -0.17 per unit of risk. If you would invest  830.00  in ADTRAN Inc on December 29, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ADTRAN Inc  vs.  Harmonic

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.

Harmonic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harmonic 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 forward indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ADTRAN and Harmonic

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

The idea behind ADTRAN Inc and Harmonic 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.