Correlation Between Ubiquiti Networks and EMCORE

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

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

Diversification Opportunities for Ubiquiti Networks and EMCORE

0.86

Correlation Coefficient

Ubiquiti Networks  EMCORE

Very poor diversification

The 3 months correlation between Ubiquiti and EMCORE is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ubiquiti Networks and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE 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 EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of Ubiquiti Networks i.e., Ubiquiti Networks and EMCORE go up and down completely randomly.

Pair Corralation between Ubiquiti Networks and EMCORE

Allowing for the 90-day total investment horizon Ubiquiti Networks is expected to generate 1.18 times less return on investment than EMCORE. But when comparing it to its historical volatility, Ubiquiti Networks is 1.22 times less risky than EMCORE. It trades about 0.21 of its potential returns per unit of risk. EMCORE is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  213.00  in EMCORE on September 25, 2024 and sell it today you would earn a total of  93.00  from holding EMCORE or generate 43.66% return on investment over 90 days.

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

Ubiquiti Networks  vs.  EMCORE

Ubiquiti Networks

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ubiquiti Networks are ranked lower than 18 (%) 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.

EMCORE

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMCORE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal forward-looking signals, EMCORE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ubiquiti Networks and EMCORE

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

The idea behind Ubiquiti Networks and EMCORE 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.