Correlation Between Aviat Networks and EchoStar

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

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

Diversification Opportunities for Aviat Networks and EchoStar

0.29

Correlation Coefficient

Aviat Networks  EchoStar

Modest diversification

The 3 months correlation between Aviat and EchoStar is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aviat Networks and EchoStar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EchoStar 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 EchoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EchoStar has no effect on the direction of Aviat Networks i.e., Aviat Networks and EchoStar go up and down completely randomly.

Pair Corralation between Aviat Networks and EchoStar

Given the investment horizon of 90 days Aviat Networks is expected to under-perform the EchoStar. But the stock apears to be less risky and, when comparing its historical volatility, Aviat Networks is 1.24 times less risky than EchoStar. The stock trades about -0.02 of its potential returns per unit of risk. The EchoStar is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,689  in EchoStar on September 13, 2024 and sell it today you would earn a total of  655.00  from holding EchoStar or generate 38.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Aviat Networks  vs.  EchoStar

Aviat Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aviat Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Aviat Networks is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

EchoStar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EchoStar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EchoStar is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aviat Networks and EchoStar

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

The idea behind Aviat Networks and EchoStar 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.