Correlation Between Ribbon Communications and GUOTAI JUNAN

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

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

Diversification Opportunities for Ribbon Communications and GUOTAI JUNAN

0.24

Correlation Coefficient

Ribbon Communications  GUOTAI JUNAN

Modest diversification

The 3 months correlation between Ribbon and GUOTAI is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and GUOTAI JUNAN SEC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUOTAI JUNAN SEC and Ribbon Communications 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 Ribbon Communications are associated (or correlated) with GUOTAI JUNAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUOTAI JUNAN SEC has no effect on the direction of Ribbon Communications i.e., Ribbon Communications and GUOTAI JUNAN go up and down completely randomly.

Pair Corralation between Ribbon Communications and GUOTAI JUNAN

Assuming the 90 days trading horizon Ribbon Communications is expected to under-perform the GUOTAI JUNAN. In addition to that, Ribbon Communications is 1.3 times more volatile than GUOTAI JUNAN SEC. It trades about -0.03 of its total potential returns per unit of risk. GUOTAI JUNAN SEC is currently generating about 0.03 per unit of volatility. If you would invest  138.00  in GUOTAI JUNAN SEC on December 20, 2024 and sell it today you would earn a total of  3.00  from holding GUOTAI JUNAN SEC or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Ribbon Communications  vs.  GUOTAI JUNAN SEC

Ribbon Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ribbon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

GUOTAI JUNAN SEC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GUOTAI JUNAN SEC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GUOTAI JUNAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ribbon Communications and GUOTAI JUNAN

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

The idea behind Ribbon Communications and GUOTAI JUNAN SEC 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.