Correlation Between Infinera and EMCORE

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

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

Diversification Opportunities for Infinera and EMCORE

0.52

Correlation Coefficient

Infinera  EMCORE

Very weak diversification

The 3 months correlation between Infinera and EMCORE is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Infinera and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE and Infinera 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 Infinera are associated (or correlated) with EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of Infinera i.e., Infinera and EMCORE go up and down completely randomly.

Pair Corralation between Infinera and EMCORE

Given the investment horizon of 90 days Infinera is expected to generate 2.65 times less return on investment than EMCORE. But when comparing it to its historical volatility, Infinera is 1.79 times less risky than EMCORE. It trades about 0.1 of its potential returns per unit of risk. EMCORE is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  300.00  in EMCORE on December 28, 2024 and sell it today you would earn a total of  10.00  from holding EMCORE or generate 3.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Infinera  vs.  EMCORE

Infinera

Risk-Adjusted Performance

OK

Over the last 90 days Infinera has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Infinera is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

EMCORE

Risk-Adjusted Performance

Good

Over the last 90 days EMCORE has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, EMCORE is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Infinera and EMCORE

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

The idea behind Infinera and EMCORE 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..