Correlation Between IDT and Ooma

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

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

Diversification Opportunities for IDT and Ooma

0.87

Correlation Coefficient

IDT  Ooma

Very poor diversification

The 3 months correlation between IDT and Ooma is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding IDT Corp. and Ooma Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ooma Inc and IDT 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 IDT Corporation are associated (or correlated) with Ooma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ooma Inc has no effect on the direction of IDT i.e., IDT and Ooma go up and down completely randomly.

Pair Corralation between IDT and Ooma

Considering the 90-day investment horizon IDT is expected to generate 1.05 times less return on investment than Ooma. In addition to that, IDT is 1.66 times more volatile than Ooma Inc. It trades about 0.17 of its total potential returns per unit of risk. Ooma Inc is currently generating about 0.29 per unit of volatility. If you would invest  1,040  in Ooma Inc on August 30, 2024 and sell it today you would earn a total of  406.00  from holding Ooma Inc or generate 39.04% return on investment over 90 days.

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

IDT Corp.  vs.  Ooma Inc

IDT Corporation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDT Corporation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, IDT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ooma Inc

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ooma Inc are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, Ooma sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IDT and Ooma

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

The idea behind IDT Corporation and Ooma 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.