Correlation Between Edgewater Wireless and POET Technologies

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

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

Diversification Opportunities for Edgewater Wireless and POET Technologies

-0.09

Correlation Coefficient

Edgewater Wireless  POET Technologies

Good diversification

The 3 months correlation between Edgewater and POET is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Edgewater Wireless Systems and POET Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POET Technologies and Edgewater Wireless 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 Edgewater Wireless Systems are associated (or correlated) with POET Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POET Technologies has no effect on the direction of Edgewater Wireless i.e., Edgewater Wireless and POET Technologies go up and down completely randomly.

Pair Corralation between Edgewater Wireless and POET Technologies

Assuming the 90 days horizon Edgewater Wireless Systems is expected to generate 1.57 times more return on investment than POET Technologies. However, Edgewater Wireless is 1.57 times more volatile than POET Technologies. It trades about 0.06 of its potential returns per unit of risk. POET Technologies is currently generating about 0.0 per unit of risk. If you would invest  4.13  in Edgewater Wireless Systems on December 21, 2024 and sell it today you would earn a total of  0.20  from holding Edgewater Wireless Systems or generate 4.84% return on investment over 90 days.

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

Edgewater Wireless Systems  vs.  POET Technologies

Edgewater Wireless

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewater Wireless Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Edgewater Wireless reported solid returns over the last few months and may actually be approaching a breakup point.

POET Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days POET Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, POET Technologies is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Edgewater Wireless and POET Technologies

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

The idea behind Edgewater Wireless Systems and POET Technologies 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.