Correlation Between Infinera and Viavi Solutions

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

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

Diversification Opportunities for Infinera and Viavi Solutions

0.43

Correlation Coefficient

Infinera  Viavi Solutions

Very weak diversification

The 3 months correlation between Infinera and Viavi is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Infinera and Viavi Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viavi Solutions 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 Viavi Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viavi Solutions has no effect on the direction of Infinera i.e., Infinera and Viavi Solutions go up and down completely randomly.

Pair Corralation between Infinera and Viavi Solutions

Given the investment horizon of 90 days Infinera is expected to generate 3.2 times less return on investment than Viavi Solutions. But when comparing it to its historical volatility, Infinera is 1.97 times less risky than Viavi Solutions. It trades about 0.12 of its potential returns per unit of risk. Viavi Solutions is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  807.00  in Viavi Solutions on September 3, 2024 and sell it today you would earn a total of  187.00  from holding Viavi Solutions or generate 23.17% return on investment over 90 days.

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

Infinera  vs.  Viavi Solutions

Infinera

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Infinera are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Infinera may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Viavi Solutions

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Viavi Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Viavi Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infinera and Viavi Solutions

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

The idea behind Infinera and Viavi Solutions 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.