Correlation Between Viavi Solutions and Infinera

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

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

Diversification Opportunities for Viavi Solutions and Infinera

0.54

Correlation Coefficient

Viavi Solutions  Infinera

Very weak diversification

The 3 months correlation between Viavi and Infinera is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Viavi Solutions and Infinera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinera and Viavi Solutions 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 Viavi Solutions are associated (or correlated) with Infinera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinera has no effect on the direction of Viavi Solutions i.e., Viavi Solutions and Infinera go up and down completely randomly.

Pair Corralation between Viavi Solutions and Infinera

Given the investment horizon of 90 days Viavi Solutions is expected to generate 17.61 times more return on investment than Infinera. However, Viavi Solutions is 17.61 times more volatile than Infinera. It trades about 0.13 of its potential returns per unit of risk. Infinera is currently generating about 0.08 per unit of risk. If you would invest  989.00  in Viavi Solutions on November 29, 2024 and sell it today you would earn a total of  119.00  from holding Viavi Solutions or generate 12.03% return on investment over 90 days.

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

Viavi Solutions  vs.  Infinera

Viavi Solutions

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viavi Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Viavi Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Infinera

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Infinera are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Infinera is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Viavi Solutions and Infinera

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

The idea behind Viavi Solutions and Infinera 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.