Correlation Between IDT and Consolidated Communications

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

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

Diversification Opportunities for IDT and Consolidated Communications

0.42

Correlation Coefficient

IDT  Consolidated Communications

Very weak diversification

The 3 months correlation between IDT and Consolidated is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding IDT Corp. and Consolidated Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Communications and IDT 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 IDT Corporation are associated (or correlated) with Consolidated Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Communications has no effect on the direction of IDT i.e., IDT and Consolidated Communications go up and down completely randomly.

Pair Corralation between IDT and Consolidated Communications

Considering the 90-day investment horizon IDT Corporation is expected to generate 6.41 times more return on investment than Consolidated Communications. However, IDT is 6.41 times more volatile than Consolidated Communications. It trades about 0.1 of its potential returns per unit of risk. Consolidated Communications is currently generating about 0.15 per unit of risk. If you would invest  3,583  in IDT Corporation on September 29, 2024 and sell it today you would earn a total of  1,210  from holding IDT Corporation or generate 33.77% return on investment over 90 days.

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

IDT Corp.  vs.  Consolidated Communications

IDT Corporation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IDT Corporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, IDT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Consolidated Communications

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Consolidated Communications is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IDT and Consolidated Communications

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

The idea behind IDT Corporation and Consolidated 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.