Correlation Between Partner Communications and Widepoint

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

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

Diversification Opportunities for Partner Communications and Widepoint

0.83

Correlation Coefficient

Partner Communications  Widepoint

Very poor diversification

The 3 months correlation between Partner and Widepoint is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Partner Communications and Widepoint C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Widepoint C and Partner 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 Partner Communications are associated (or correlated) with Widepoint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Widepoint C has no effect on the direction of Partner Communications i.e., Partner Communications and Widepoint go up and down completely randomly.

Pair Corralation between Partner Communications and Widepoint

Assuming the 90 days horizon Partner Communications is expected to generate 4.32 times less return on investment than Widepoint. But when comparing it to its historical volatility, Partner Communications is 1.23 times less risky than Widepoint. It trades about 0.03 of its potential returns per unit of risk. Widepoint C is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Widepoint C on September 4, 2024 and sell it today you would earn a total of  296.00  from holding Widepoint C or generate 148.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	86.64%
Values	Daily Returns

Partner Communications  vs.  Widepoint C

Partner Communications

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Partner Communications are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Partner Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Widepoint C

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Widepoint C are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Widepoint showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Partner Communications and Widepoint

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

The idea behind Partner Communications and Widepoint C 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.