Correlation Between Carnegie Clean and Ribbon Communications

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

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

Diversification Opportunities for Carnegie Clean and Ribbon Communications

-0.16

Correlation Coefficient

Carnegie Clean  Ribbon Communications

Good diversification

The 3 months correlation between Carnegie and Ribbon is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Carnegie Clean Energy and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications and Carnegie Clean 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 Carnegie Clean Energy are associated (or correlated) with Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of Carnegie Clean i.e., Carnegie Clean and Ribbon Communications go up and down completely randomly.

Pair Corralation between Carnegie Clean and Ribbon Communications

Assuming the 90 days trading horizon Carnegie Clean is expected to generate 25.63 times less return on investment than Ribbon Communications. In addition to that, Carnegie Clean is 1.25 times more volatile than Ribbon Communications. It trades about 0.01 of its total potential returns per unit of risk. Ribbon Communications is currently generating about 0.16 per unit of volatility. If you would invest  312.00  in Ribbon Communications on October 21, 2024 and sell it today you would earn a total of  80.00  from holding Ribbon Communications or generate 25.64% return on investment over 90 days.

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

Carnegie Clean Energy  vs.  Ribbon Communications

Carnegie Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnegie Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Carnegie Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ribbon Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ribbon Communications are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ribbon Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carnegie Clean and Ribbon Communications

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

The idea behind Carnegie Clean Energy and Ribbon Communications 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.