Correlation Between Extreme Networks and Gilat Satellite

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

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

Diversification Opportunities for Extreme Networks and Gilat Satellite

0.68

Correlation Coefficient

Extreme Networks  Gilat Satellite

Poor diversification

The 3 months correlation between Extreme and Gilat is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Extreme Networks and Gilat Satellite Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Satellite Networks and Extreme 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 Extreme Networks are associated (or correlated) with Gilat Satellite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Satellite Networks has no effect on the direction of Extreme Networks i.e., Extreme Networks and Gilat Satellite go up and down completely randomly.

Pair Corralation between Extreme Networks and Gilat Satellite

Given the investment horizon of 90 days Extreme Networks is expected to generate 1.64 times less return on investment than Gilat Satellite. But when comparing it to its historical volatility, Extreme Networks is 1.05 times less risky than Gilat Satellite. It trades about 0.08 of its potential returns per unit of risk. Gilat Satellite Networks is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  444.00  in Gilat Satellite Networks on September 2, 2024 and sell it today you would earn a total of  104.00  from holding Gilat Satellite Networks or generate 23.42% return on investment over 90 days.

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

Extreme Networks  vs.  Gilat Satellite Networks

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.

Gilat Satellite Networks

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gilat Satellite Networks are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Gilat Satellite unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extreme Networks and Gilat Satellite

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

The idea behind Extreme Networks and Gilat Satellite 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.