Correlation Between Comtech Telecommunicatio and Aviat Networks

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

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

Diversification Opportunities for Comtech Telecommunicatio and Aviat Networks

-0.55

Correlation Coefficient

Comtech Telecommunicatio  Aviat Networks

Excellent diversification

The 3 months correlation between Comtech and Aviat is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Comtech Telecommunications Cor and Aviat Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviat Networks and Comtech Telecommunicatio 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 Comtech Telecommunications Corp are associated (or correlated) with Aviat Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviat Networks has no effect on the direction of Comtech Telecommunicatio i.e., Comtech Telecommunicatio and Aviat Networks go up and down completely randomly.

Pair Corralation between Comtech Telecommunicatio and Aviat Networks

Given the investment horizon of 90 days Comtech Telecommunications Corp is expected to under-perform the Aviat Networks. In addition to that, Comtech Telecommunicatio is 1.87 times more volatile than Aviat Networks. It trades about -0.08 of its total potential returns per unit of risk. Aviat Networks is currently generating about 0.14 per unit of volatility. If you would invest  1,583  in Aviat Networks on November 28, 2024 and sell it today you would earn a total of  563.00  from holding Aviat Networks or generate 35.57% return on investment over 90 days.

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

Comtech Telecommunications Cor  vs.  Aviat Networks

Comtech Telecommunicatio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Comtech Telecommunications Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aviat Networks

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aviat Networks are ranked lower than 10 (%) 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.

Pair Trading with Comtech Telecommunicatio and Aviat Networks

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

The idea behind Comtech Telecommunications Corp and Aviat Networks 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.