Correlation Between Ribbon Communications and SENECA FOODS

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

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

Diversification Opportunities for Ribbon Communications and SENECA FOODS

0.82

Correlation Coefficient

Ribbon Communications  SENECA FOODS

Very poor diversification

The 3 months correlation between Ribbon and SENECA is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and SENECA FOODS A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SENECA FOODS A and Ribbon Communications 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 Ribbon Communications are associated (or correlated) with SENECA FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SENECA FOODS A has no effect on the direction of Ribbon Communications i.e., Ribbon Communications and SENECA FOODS go up and down completely randomly.

Pair Corralation between Ribbon Communications and SENECA FOODS

Assuming the 90 days trading horizon Ribbon Communications is expected to generate 1.51 times more return on investment than SENECA FOODS. However, Ribbon Communications is 1.51 times more volatile than SENECA FOODS A. It trades about 0.08 of its potential returns per unit of risk. SENECA FOODS A is currently generating about 0.11 per unit of risk. If you would invest  290.00  in Ribbon Communications on September 25, 2024 and sell it today you would earn a total of  104.00  from holding Ribbon Communications or generate 35.86% return on investment over 90 days.

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

Ribbon Communications  vs.  SENECA FOODS A

Ribbon Communications

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ribbon Communications are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ribbon Communications reported solid returns over the last few months and may actually be approaching a breakup point.

SENECA FOODS A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SENECA FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ribbon Communications and SENECA FOODS

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

The idea behind Ribbon Communications and SENECA FOODS A 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.