Correlation Between Arista Networks and Syntec Optics

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

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

Diversification Opportunities for Arista Networks and Syntec Optics

0.6

Correlation Coefficient

Arista Networks  Syntec Optics

Poor diversification

The 3 months correlation between Arista and Syntec is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Arista Networks and Syntec Optics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Syntec Optics Holdings and Arista Networks 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 Arista Networks are associated (or correlated) with Syntec Optics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Syntec Optics Holdings has no effect on the direction of Arista Networks i.e., Arista Networks and Syntec Optics go up and down completely randomly.

Pair Corralation between Arista Networks and Syntec Optics

Given the investment horizon of 90 days Arista Networks is expected to generate 0.26 times more return on investment than Syntec Optics. However, Arista Networks is 3.86 times less risky than Syntec Optics. It trades about 0.12 of its potential returns per unit of risk. Syntec Optics Holdings is currently generating about 0.02 per unit of risk. If you would invest  2,737  in Arista Networks on September 26, 2024 and sell it today you would earn a total of  8,572  from holding Arista Networks or generate 313.19% return on investment over 90 days.

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

Arista Networks  vs.  Syntec Optics Holdings

Arista Networks

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arista Networks are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Arista Networks unveiled solid returns over the last few months and may actually be approaching a breakup point.

Syntec Optics Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Syntec Optics Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Syntec Optics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arista Networks and Syntec Optics

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

The idea behind Arista Networks and Syntec Optics Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.