Correlation Between Applied Opt and Infinera

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

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

Diversification Opportunities for Applied Opt and Infinera

0.18

Correlation Coefficient

Applied Opt  Infinera

Average diversification

The 3 months correlation between Applied and Infinera is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Applied Opt and Infinera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinera and Applied Opt 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 Applied Opt 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 Applied Opt i.e., Applied Opt and Infinera go up and down completely randomly.

Pair Corralation between Applied Opt and Infinera

Given the investment horizon of 90 days Applied Opt is expected to generate 9.94 times more return on investment than Infinera. However, Applied Opt is 9.94 times more volatile than Infinera. It trades about 0.25 of its potential returns per unit of risk. Infinera is currently generating about 0.12 per unit of risk. If you would invest  1,226  in Applied Opt on September 3, 2024 and sell it today you would earn a total of  2,848  from holding Applied Opt or generate 232.3% return on investment over 90 days.

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

Applied Opt  vs.  Infinera

Applied Opt

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Opt are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Applied Opt demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Infinera

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Infinera are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Infinera may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Applied Opt and Infinera

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

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.