Correlation Between F5 Networks and Allot Communications

Can any of the company-specific risk be diversified away by investing in both F5 Networks and Allot 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 F5 Networks and Allot Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between F5 Networks and Allot Communications, you can compare the effects of market volatilities on F5 Networks and Allot 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 F5 Networks with a short position of Allot Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of F5 Networks and Allot Communications.

Diversification Opportunities for F5 Networks and Allot Communications

0.57

Correlation Coefficient

F5 Networks  Allot Communications

Very weak diversification

The 3 months correlation between FFIV and Allot is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding F5 Networks and Allot Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allot Communications and F5 Networks 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 F5 Networks are associated (or correlated) with Allot Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allot Communications has no effect on the direction of F5 Networks i.e., F5 Networks and Allot Communications go up and down completely randomly.

Pair Corralation between F5 Networks and Allot Communications

Given the investment horizon of 90 days F5 Networks is expected to generate 1.85 times less return on investment than Allot Communications. But when comparing it to its historical volatility, F5 Networks is 2.66 times less risky than Allot Communications. It trades about 0.06 of its potential returns per unit of risk. Allot Communications is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  592.00  in Allot Communications on December 27, 2024 and sell it today you would earn a total of  32.00  from holding Allot Communications or generate 5.41% return on investment over 90 days.

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

F5 Networks  vs.  Allot Communications

F5 Networks

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in F5 Networks are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, F5 Networks may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Allot Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Allot Communications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting essential indicators, Allot Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with F5 Networks and Allot Communications

The main advantage of trading using opposite F5 Networks and Allot Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if F5 Networks position performs unexpectedly, Allot 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 Allot Communications will offset losses from the drop in Allot Communications' long position.

The idea behind F5 Networks and Allot 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.