Correlation Between Ooma and IHS Holding

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

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

Diversification Opportunities for Ooma and IHS Holding

0.35

Correlation Coefficient

Ooma  IHS Holding

Weak diversification

The 3 months correlation between Ooma and IHS is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ooma Inc and IHS Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHS Holding and Ooma 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 Ooma Inc are associated (or correlated) with IHS Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHS Holding has no effect on the direction of Ooma i.e., Ooma and IHS Holding go up and down completely randomly.

Pair Corralation between Ooma and IHS Holding

Given the investment horizon of 90 days Ooma Inc is expected to generate 1.02 times more return on investment than IHS Holding. However, Ooma is 1.02 times more volatile than IHS Holding. It trades about 0.12 of its potential returns per unit of risk. IHS Holding is currently generating about 0.01 per unit of risk. If you would invest  912.00  in Ooma Inc on September 29, 2024 and sell it today you would earn a total of  514.00  from holding Ooma Inc or generate 56.36% return on investment over 90 days.

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

Ooma Inc  vs.  IHS Holding

Ooma Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ooma Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, Ooma sustained solid returns over the last few months and may actually be approaching a breakup point.

IHS Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IHS Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, IHS Holding is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ooma and IHS Holding

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

The idea behind Ooma Inc and IHS Holding 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 Stocks Directory module to find actively traded stocks across global markets.