Correlation Between Ooma and Telephone

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

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

Diversification Opportunities for Ooma and Telephone

0.42

Correlation Coefficient

Ooma  Telephone

Very weak diversification

The 3 months correlation between Ooma and Telephone is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ooma Inc and Telephone and Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telephone and Data 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 Telephone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telephone and Data has no effect on the direction of Ooma i.e., Ooma and Telephone go up and down completely randomly.

Pair Corralation between Ooma and Telephone

Given the investment horizon of 90 days Ooma Inc is expected to under-perform the Telephone. But the stock apears to be less risky and, when comparing its historical volatility, Ooma Inc is 1.17 times less risky than Telephone. The stock trades about -0.07 of its potential returns per unit of risk. The Telephone and Data is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,397  in Telephone and Data on December 29, 2024 and sell it today you would earn a total of  479.00  from holding Telephone and Data or generate 14.1% return on investment over 90 days.

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

Ooma Inc  vs.  Telephone and Data

Ooma Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ooma Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Telephone and Data

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telephone and Data are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental indicators, Telephone unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ooma and Telephone

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

The idea behind Ooma Inc and Telephone and Data 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.