Correlation Between WGHT WTCHER and Ribbon Communications

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

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

Diversification Opportunities for WGHT WTCHER and Ribbon Communications

0.23

Correlation Coefficient

WGHT WTCHER  Ribbon Communications

Modest diversification

The 3 months correlation between WGHT and Ribbon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding WGHT WTCHER INTL and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications and WGHT WTCHER 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 WGHT WTCHER INTL are associated (or correlated) with Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of WGHT WTCHER i.e., WGHT WTCHER and Ribbon Communications go up and down completely randomly.

Pair Corralation between WGHT WTCHER and Ribbon Communications

Assuming the 90 days trading horizon WGHT WTCHER INTL is expected to generate 3.72 times more return on investment than Ribbon Communications. However, WGHT WTCHER is 3.72 times more volatile than Ribbon Communications. It trades about 0.07 of its potential returns per unit of risk. Ribbon Communications is currently generating about 0.1 per unit of risk. If you would invest  135.00  in WGHT WTCHER INTL on October 11, 2024 and sell it today you would earn a total of  7.00  from holding WGHT WTCHER INTL or generate 5.19% return on investment over 90 days.

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

WGHT WTCHER INTL  vs.  Ribbon Communications

WGHT WTCHER INTL

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days WGHT WTCHER INTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WGHT WTCHER is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ribbon Communications

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ribbon Communications are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Ribbon Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WGHT WTCHER and Ribbon Communications

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

The idea behind WGHT WTCHER INTL and Ribbon Communications 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.