Correlation Between EchoStar and ADTRAN

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

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

Diversification Opportunities for EchoStar and ADTRAN

0.85

Correlation Coefficient

EchoStar  ADTRAN

Very poor diversification

The 3 months correlation between EchoStar and ADTRAN is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding EchoStar and ADTRAN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADTRAN Inc and EchoStar 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 EchoStar are associated (or correlated) with ADTRAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADTRAN Inc has no effect on the direction of EchoStar i.e., EchoStar and ADTRAN go up and down completely randomly.

Pair Corralation between EchoStar and ADTRAN

Given the investment horizon of 90 days EchoStar is expected to generate 0.66 times more return on investment than ADTRAN. However, EchoStar is 1.51 times less risky than ADTRAN. It trades about 0.32 of its potential returns per unit of risk. ADTRAN Inc is currently generating about 0.0 per unit of risk. If you would invest  2,747  in EchoStar on December 1, 2024 and sell it today you would earn a total of  376.00  from holding EchoStar or generate 13.69% return on investment over 90 days.

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

EchoStar  vs.  ADTRAN Inc

EchoStar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, EchoStar unveiled solid returns over the last few months and may actually be approaching a breakup point.

ADTRAN Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADTRAN Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, ADTRAN displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EchoStar and ADTRAN

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

The idea behind EchoStar and ADTRAN Inc 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.