Correlation Between Vecima Networks and ADTRAN

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

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

Diversification Opportunities for Vecima Networks and ADTRAN

-0.86

Correlation Coefficient

Vecima Networks  ADTRAN

Pay attention - limited upside

The 3 months correlation between Vecima and ADTRAN is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vecima Networks and ADTRAN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADTRAN Inc and Vecima 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 Vecima 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 Vecima Networks i.e., Vecima Networks and ADTRAN go up and down completely randomly.

Pair Corralation between Vecima Networks and ADTRAN

Assuming the 90 days horizon Vecima Networks is expected to under-perform the ADTRAN. But the pink sheet apears to be less risky and, when comparing its historical volatility, Vecima Networks is 1.08 times less risky than ADTRAN. The pink sheet trades about -0.02 of its potential returns per unit of risk. The ADTRAN Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  530.00  in ADTRAN Inc on October 21, 2024 and sell it today you would earn a total of  489.00  from holding ADTRAN Inc or generate 92.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	67.36%
Values	Daily Returns

Vecima Networks  vs.  ADTRAN Inc

Vecima Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vecima Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ADTRAN Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ADTRAN Inc are ranked lower than 18 (%) 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 Vecima Networks and ADTRAN

The main advantage of trading using opposite Vecima Networks and ADTRAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vecima 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 Vecima 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.