Correlation Between SPORT LISBOA and Ribbon Communications

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

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

Diversification Opportunities for SPORT LISBOA and Ribbon Communications

-0.29

Correlation Coefficient

SPORT LISBOA  Ribbon Communications

Very good diversification

The 3 months correlation between SPORT and Ribbon is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding SPORT LISBOA E and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications and SPORT LISBOA 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 SPORT LISBOA E are associated (or correlated) with Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of SPORT LISBOA i.e., SPORT LISBOA and Ribbon Communications go up and down completely randomly.

Pair Corralation between SPORT LISBOA and Ribbon Communications

Assuming the 90 days horizon SPORT LISBOA is expected to generate 16.45 times less return on investment than Ribbon Communications. In addition to that, SPORT LISBOA is 1.81 times more volatile than Ribbon Communications. It trades about 0.0 of its total potential returns per unit of risk. Ribbon Communications is currently generating about 0.09 per unit of volatility. If you would invest  390.00  in Ribbon Communications on October 26, 2024 and sell it today you would earn a total of  10.00  from holding Ribbon Communications or generate 2.56% return on investment over 90 days.

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

SPORT LISBOA E  vs.  Ribbon Communications

SPORT LISBOA E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPORT LISBOA E has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SPORT LISBOA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ribbon Communications

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ribbon Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Ribbon Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPORT LISBOA and Ribbon Communications

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

The idea behind SPORT LISBOA E and Ribbon 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.