Correlation Between Optical Cable and Harmonic

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

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

Diversification Opportunities for Optical Cable and Harmonic

0.15

Correlation Coefficient

Optical Cable  Harmonic

Average diversification

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

Pair Corralation between Optical Cable and Harmonic

Considering the 90-day investment horizon Optical Cable is expected to generate 6.39 times more return on investment than Harmonic. However, Optical Cable is 6.39 times more volatile than Harmonic. It trades about 0.2 of its potential returns per unit of risk. Harmonic is currently generating about 0.18 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Optical Cable  vs.  Harmonic

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.

Harmonic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Harmonic are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Harmonic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Optical Cable and Harmonic

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

The idea behind Optical Cable and Harmonic 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.