Correlation Between Ubiquiti Networks and ADTRAN

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

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

Diversification Opportunities for Ubiquiti Networks and ADTRAN

0.97

Correlation Coefficient

Ubiquiti Networks  ADTRAN

Almost no diversification

The 3 months correlation between Ubiquiti and ADTRAN is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Ubiquiti Networks and ADTRAN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADTRAN Inc and Ubiquiti Networks 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 Ubiquiti Networks 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 Ubiquiti Networks i.e., Ubiquiti Networks and ADTRAN go up and down completely randomly.

Pair Corralation between Ubiquiti Networks and ADTRAN

Allowing for the 90-day total investment horizon Ubiquiti Networks is expected to generate 1.13 times more return on investment than ADTRAN. However, Ubiquiti Networks is 1.13 times more volatile than ADTRAN Inc. It trades about -0.05 of its potential returns per unit of risk. ADTRAN Inc is currently generating about -0.11 per unit of risk. If you would invest  35,167  in Ubiquiti Networks on October 1, 2024 and sell it today you would lose (1,086) from holding Ubiquiti Networks or give up 3.09% of portfolio value over 90 days.

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

Ubiquiti Networks  vs.  ADTRAN Inc

Ubiquiti Networks

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ubiquiti Networks are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Ubiquiti Networks demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ADTRAN Inc

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Ubiquiti Networks and ADTRAN

The main advantage of trading using opposite Ubiquiti Networks and ADTRAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ubiquiti Networks 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 Ubiquiti Networks 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.