Correlation Between Consolidated Communications and Axway Software

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

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

Diversification Opportunities for Consolidated Communications and Axway Software

0.7

Correlation Coefficient

Consolidated Communications  Axway Software

Poor diversification

The 3 months correlation between Consolidated and Axway is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and Axway Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axway Software SA and Consolidated 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 Consolidated Communications Holdings are associated (or correlated) with Axway Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axway Software SA has no effect on the direction of Consolidated Communications i.e., Consolidated Communications and Axway Software go up and down completely randomly.

Pair Corralation between Consolidated Communications and Axway Software

Assuming the 90 days horizon Consolidated Communications is expected to generate 1.28 times less return on investment than Axway Software. But when comparing it to its historical volatility, Consolidated Communications Holdings is 1.91 times less risky than Axway Software. It trades about 0.11 of its potential returns per unit of risk. Axway Software SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,700  in Axway Software SA on October 5, 2024 and sell it today you would earn a total of  30.00  from holding Axway Software SA or generate 1.11% return on investment over 90 days.

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

Consolidated Communications Ho  vs.  Axway Software SA

Consolidated Communications

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Consolidated Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Axway Software SA

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Axway Software SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Axway Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consolidated Communications and Axway Software

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

The idea behind Consolidated Communications Holdings and Axway Software SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.