Correlation Between Ribbon Communications and INDIKA ENERGY

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

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

Diversification Opportunities for Ribbon Communications and INDIKA ENERGY

0.31

Correlation Coefficient

Ribbon Communications  INDIKA ENERGY

Weak diversification

The 3 months correlation between Ribbon and INDIKA is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and INDIKA ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDIKA ENERGY 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 INDIKA ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDIKA ENERGY has no effect on the direction of Ribbon Communications i.e., Ribbon Communications and INDIKA ENERGY go up and down completely randomly.

Pair Corralation between Ribbon Communications and INDIKA ENERGY

Assuming the 90 days trading horizon Ribbon Communications is expected to generate 1.57 times more return on investment than INDIKA ENERGY. However, Ribbon Communications is 1.57 times more volatile than INDIKA ENERGY. It trades about 0.0 of its potential returns per unit of risk. INDIKA ENERGY is currently generating about -0.08 per unit of risk. If you would invest  384.00  in Ribbon Communications on December 29, 2024 and sell it today you would lose (16.00) from holding Ribbon Communications or give up 4.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Ribbon Communications  vs.  INDIKA ENERGY

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.

INDIKA ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days INDIKA ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ribbon Communications and INDIKA ENERGY

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

The idea behind Ribbon Communications and INDIKA ENERGY 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.