Correlation Between Optical Cable and AudioCodes

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

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

Diversification Opportunities for Optical Cable and AudioCodes

0.36

Correlation Coefficient

Optical Cable  AudioCodes

Weak diversification

The 3 months correlation between Optical and AudioCodes is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Optical Cable and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes and Optical Cable 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 Optical Cable are associated (or correlated) with AudioCodes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioCodes has no effect on the direction of Optical Cable i.e., Optical Cable and AudioCodes go up and down completely randomly.

Pair Corralation between Optical Cable and AudioCodes

Considering the 90-day investment horizon Optical Cable is expected to generate 4.61 times more return on investment than AudioCodes. However, Optical Cable is 4.61 times more volatile than AudioCodes. It trades about 0.2 of its potential returns per unit of risk. AudioCodes is currently generating about 0.27 per unit of risk. If you would invest  240.00  in Optical Cable on October 7, 2024 and sell it today you would earn a total of  233.00  from holding Optical Cable or generate 97.08% return on investment over 90 days.

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

Optical Cable  vs.  AudioCodes

Optical Cable

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Optical Cable are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Optical Cable exhibited solid returns over the last few months and may actually be approaching a breakup point.

AudioCodes

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AudioCodes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, AudioCodes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Optical Cable and AudioCodes

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

The idea behind Optical Cable and AudioCodes 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.