Correlation Between Allot Communications and BlackBerry

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

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

Diversification Opportunities for Allot Communications and BlackBerry

0.86

Correlation Coefficient

Allot Communications  BlackBerry

Very poor diversification

The 3 months correlation between Allot and BlackBerry is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Allot Communications and BlackBerry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackBerry and Allot Communications 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 Allot Communications are associated (or correlated) with BlackBerry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackBerry has no effect on the direction of Allot Communications i.e., Allot Communications and BlackBerry go up and down completely randomly.

Pair Corralation between Allot Communications and BlackBerry

Given the investment horizon of 90 days Allot Communications is expected to generate 0.91 times more return on investment than BlackBerry. However, Allot Communications is 1.1 times less risky than BlackBerry. It trades about 0.06 of its potential returns per unit of risk. BlackBerry is currently generating about 0.02 per unit of risk. If you would invest  370.00  in Allot Communications on October 13, 2024 and sell it today you would earn a total of  378.00  from holding Allot Communications or generate 102.16% return on investment over 90 days.

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

Allot Communications  vs.  BlackBerry

Allot Communications

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Allot Communications are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting essential indicators, Allot Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

BlackBerry

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlackBerry are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, BlackBerry sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allot Communications and BlackBerry

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

The idea behind Allot Communications and BlackBerry 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.