Correlation Between Cable One and InterDigital

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

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

Diversification Opportunities for Cable One and InterDigital

-0.67

Correlation Coefficient

Cable One  InterDigital

Excellent diversification

The 3 months correlation between Cable and InterDigital is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cable One and InterDigital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterDigital and Cable One 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 Cable One are associated (or correlated) with InterDigital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterDigital has no effect on the direction of Cable One i.e., Cable One and InterDigital go up and down completely randomly.

Pair Corralation between Cable One and InterDigital

Given the investment horizon of 90 days Cable One is expected to under-perform the InterDigital. In addition to that, Cable One is 1.22 times more volatile than InterDigital. It trades about -0.12 of its total potential returns per unit of risk. InterDigital is currently generating about 0.05 per unit of volatility. If you would invest  19,528  in InterDigital on December 30, 2024 and sell it today you would earn a total of  1,476  from holding InterDigital or generate 7.56% return on investment over 90 days.

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

Cable One  vs.  InterDigital

Cable One

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cable One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

InterDigital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InterDigital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, InterDigital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cable One and InterDigital

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

The idea behind Cable One and InterDigital 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.