Correlation Between Ribbon Communications and INTER CARS

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

By analyzing existing cross correlation between Ribbon Communications and INTER CARS SA, you can compare the effects of market volatilities on Ribbon Communications and INTER CARS 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 INTER CARS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ribbon Communications and INTER CARS.

Diversification Opportunities for Ribbon Communications and INTER CARS

0.7

Correlation Coefficient

Ribbon Communications  INTER CARS

Poor diversification

The 3 months correlation between Ribbon and INTER is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of Ribbon Communications i.e., Ribbon Communications and INTER CARS go up and down completely randomly.

Pair Corralation between Ribbon Communications and INTER CARS

Assuming the 90 days trading horizon Ribbon Communications is expected to generate 1.85 times more return on investment than INTER CARS. However, Ribbon Communications is 1.85 times more volatile than INTER CARS SA. It trades about 0.21 of its potential returns per unit of risk. INTER CARS SA is currently generating about 0.01 per unit of risk. If you would invest  382.00  in Ribbon Communications on December 4, 2024 and sell it today you would earn a total of  72.00  from holding Ribbon Communications or generate 18.85% return on investment over 90 days.

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

Ribbon Communications  vs.  INTER CARS SA

Ribbon Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ribbon Communications are ranked lower than 9 (%) 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.

INTER CARS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, INTER CARS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ribbon Communications and INTER CARS

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

The idea behind Ribbon Communications and INTER CARS SA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.