Correlation Between Comtech Telecommunicatio and Extreme Networks

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

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

Diversification Opportunities for Comtech Telecommunicatio and Extreme Networks

-0.29

Correlation Coefficient

Comtech Telecommunicatio  Extreme Networks

Very good diversification

The 3 months correlation between Comtech and Extreme is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Comtech Telecommunications Cor and Extreme Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extreme Networks and Comtech Telecommunicatio 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 Comtech Telecommunications Corp are associated (or correlated) with Extreme Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extreme Networks has no effect on the direction of Comtech Telecommunicatio i.e., Comtech Telecommunicatio and Extreme Networks go up and down completely randomly.

Pair Corralation between Comtech Telecommunicatio and Extreme Networks

Given the investment horizon of 90 days Comtech Telecommunications Corp is expected to under-perform the Extreme Networks. In addition to that, Comtech Telecommunicatio is 2.78 times more volatile than Extreme Networks. It trades about -0.02 of its total potential returns per unit of risk. Extreme Networks is currently generating about 0.06 per unit of volatility. If you would invest  1,592  in Extreme Networks on August 31, 2024 and sell it today you would earn a total of  50.00  from holding Extreme Networks or generate 3.14% return on investment over 90 days.

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

Comtech Telecommunications Cor  vs.  Extreme Networks

Comtech Telecommunicatio

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Comtech Telecommunications Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Comtech Telecommunicatio disclosed solid returns over the last few months and may actually be approaching a breakup point.

Extreme Networks

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Extreme Networks are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Extreme Networks reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Comtech Telecommunicatio and Extreme Networks

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

The idea behind Comtech Telecommunications Corp and Extreme Networks 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.