Correlation Between Frequency Electronics and AudioCodes

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

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

Diversification Opportunities for Frequency Electronics and AudioCodes

-0.27

Correlation Coefficient

Frequency Electronics  AudioCodes

Very good diversification

The 3 months correlation between Frequency and AudioCodes is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Frequency Electronics and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes and Frequency Electronics 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 Frequency Electronics are associated (or correlated) with AudioCodes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioCodes has no effect on the direction of Frequency Electronics i.e., Frequency Electronics and AudioCodes go up and down completely randomly.

Pair Corralation between Frequency Electronics and AudioCodes

Given the investment horizon of 90 days Frequency Electronics is expected to under-perform the AudioCodes. In addition to that, Frequency Electronics is 1.29 times more volatile than AudioCodes. It trades about -0.07 of its total potential returns per unit of risk. AudioCodes is currently generating about 0.03 per unit of volatility. If you would invest  970.00  in AudioCodes on December 24, 2024 and sell it today you would earn a total of  31.00  from holding AudioCodes or generate 3.2% return on investment over 90 days.

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

Frequency Electronics  vs.  AudioCodes

Frequency Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frequency Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators 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.

AudioCodes

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AudioCodes are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, AudioCodes is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Frequency Electronics and AudioCodes

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

The idea behind Frequency Electronics and AudioCodes 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.