Correlation Between Ribbon Communications and COSCO SHIPPING

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

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

Diversification Opportunities for Ribbon Communications and COSCO SHIPPING

0.27

Correlation Coefficient

Ribbon Communications  COSCO SHIPPING

Modest diversification

The 3 months correlation between Ribbon and COSCO is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and COSCO SHIPPING Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING Holdings 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 COSCO SHIPPING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSCO SHIPPING Holdings has no effect on the direction of Ribbon Communications i.e., Ribbon Communications and COSCO SHIPPING go up and down completely randomly.

Pair Corralation between Ribbon Communications and COSCO SHIPPING

Assuming the 90 days trading horizon Ribbon Communications is expected to under-perform the COSCO SHIPPING. In addition to that, Ribbon Communications is 1.58 times more volatile than COSCO SHIPPING Holdings. It trades about -0.04 of its total potential returns per unit of risk. COSCO SHIPPING Holdings is currently generating about -0.04 per unit of volatility. If you would invest  149.00  in COSCO SHIPPING Holdings on December 21, 2024 and sell it today you would lose (10.00) from holding COSCO SHIPPING Holdings or give up 6.71% of portfolio value over 90 days.

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

Ribbon Communications  vs.  COSCO SHIPPING Holdings

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.

COSCO SHIPPING Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ribbon Communications and COSCO SHIPPING

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

The idea behind Ribbon Communications and COSCO SHIPPING Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.