Correlation Between Passage Bio and Aviat Networks

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

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

Diversification Opportunities for Passage Bio and Aviat Networks

-0.03

Correlation Coefficient

Passage Bio  Aviat Networks

Good diversification

The 3 months correlation between Passage and Aviat is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio and Aviat Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviat Networks and Passage Bio 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 Passage Bio are associated (or correlated) with Aviat Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviat Networks has no effect on the direction of Passage Bio i.e., Passage Bio and Aviat Networks go up and down completely randomly.

Pair Corralation between Passage Bio and Aviat Networks

Given the investment horizon of 90 days Passage Bio is expected to generate 2.0 times more return on investment than Aviat Networks. However, Passage Bio is 2.0 times more volatile than Aviat Networks. It trades about 0.05 of its potential returns per unit of risk. Aviat Networks is currently generating about -0.02 per unit of risk. If you would invest  73.00  in Passage Bio on September 15, 2024 and sell it today you would earn a total of  3.00  from holding Passage Bio or generate 4.11% return on investment over 90 days.

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

Passage Bio  vs.  Aviat Networks

Passage Bio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Passage Bio are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Passage Bio reported solid returns over the last few months and may actually be approaching a breakup point.

Aviat Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aviat Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Passage Bio and Aviat Networks

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

The idea behind Passage Bio and Aviat 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.