Correlation Between Ribbon Communications and GrafTech International

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

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

Diversification Opportunities for Ribbon Communications and GrafTech International

-0.15

Correlation Coefficient

Ribbon Communications  GrafTech International

Good diversification

The 3 months correlation between Ribbon and GrafTech is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and GrafTech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrafTech International 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 GrafTech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrafTech International has no effect on the direction of Ribbon Communications i.e., Ribbon Communications and GrafTech International go up and down completely randomly.

Pair Corralation between Ribbon Communications and GrafTech International

Assuming the 90 days trading horizon Ribbon Communications is expected to generate 0.65 times more return on investment than GrafTech International. However, Ribbon Communications is 1.53 times less risky than GrafTech International. It trades about -0.02 of its potential returns per unit of risk. GrafTech International is currently generating about -0.12 per unit of risk. If you would invest  398.00  in Ribbon Communications on December 23, 2024 and sell it today you would lose (30.00) from holding Ribbon Communications or give up 7.54% of portfolio value over 90 days.

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

Ribbon Communications  vs.  GrafTech International

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 nearly stable basic indicators, Ribbon Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GrafTech International

Risk-Adjusted Performance

Very Weak

Over the last 90 days GrafTech International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ribbon Communications and GrafTech International

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

The idea behind Ribbon Communications and GrafTech International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.