Correlation Between EchoStar and Extreme Networks

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

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

Diversification Opportunities for EchoStar and Extreme Networks

-0.62

Correlation Coefficient

EchoStar  Extreme Networks

Excellent diversification

The 3 months correlation between EchoStar and Extreme is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding EchoStar and Extreme Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extreme Networks 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 Extreme Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extreme Networks has no effect on the direction of EchoStar i.e., EchoStar and Extreme Networks go up and down completely randomly.

Pair Corralation between EchoStar and Extreme Networks

Given the investment horizon of 90 days EchoStar is expected to generate 1.06 times more return on investment than Extreme Networks. However, EchoStar is 1.06 times more volatile than Extreme Networks. It trades about 0.16 of its potential returns per unit of risk. Extreme Networks is currently generating about -0.05 per unit of risk. If you would invest  2,529  in EchoStar on November 29, 2024 and sell it today you would earn a total of  541.00  from holding EchoStar or generate 21.39% return on investment over 90 days.

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

EchoStar  vs.  Extreme Networks

EchoStar

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EchoStar are ranked lower than 12 (%) 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.

Extreme Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Extreme Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with EchoStar and Extreme Networks

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

The idea behind EchoStar and Extreme Networks 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.