Correlation Between Aviat Networks and Clearfield

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

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

Diversification Opportunities for Aviat Networks and Clearfield

0.11

Correlation Coefficient

Aviat Networks  Clearfield

Average diversification

The 3 months correlation between Aviat and Clearfield is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aviat Networks and Clearfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearfield and Aviat 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 Aviat Networks are associated (or correlated) with Clearfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearfield has no effect on the direction of Aviat Networks i.e., Aviat Networks and Clearfield go up and down completely randomly.

Pair Corralation between Aviat Networks and Clearfield

Given the investment horizon of 90 days Aviat Networks is expected to generate 1.55 times more return on investment than Clearfield. However, Aviat Networks is 1.55 times more volatile than Clearfield. It trades about 0.05 of its potential returns per unit of risk. Clearfield is currently generating about -0.01 per unit of risk. If you would invest  1,749  in Aviat Networks on December 30, 2024 and sell it today you would earn a total of  139.00  from holding Aviat Networks or generate 7.95% return on investment over 90 days.

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

Aviat Networks  vs.  Clearfield

Aviat Networks

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aviat Networks are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Aviat Networks showed solid returns over the last few months and may actually be approaching a breakup point.

Clearfield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clearfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Clearfield is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aviat Networks and Clearfield

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

The idea behind Aviat Networks and Clearfield 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.