Correlation Between Ribbon Communications and Neonode

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

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

Diversification Opportunities for Ribbon Communications and Neonode

-0.48

Correlation Coefficient

Ribbon Communications  Neonode

Very good diversification

The 3 months correlation between Ribbon and Neonode is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ribbon Communications and Neonode in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neonode 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 Neonode. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neonode has no effect on the direction of Ribbon Communications i.e., Ribbon Communications and Neonode go up and down completely randomly.

Pair Corralation between Ribbon Communications and Neonode

Given the investment horizon of 90 days Ribbon Communications is expected to generate 1.55 times less return on investment than Neonode. But when comparing it to its historical volatility, Ribbon Communications is 3.13 times less risky than Neonode. It trades about 0.15 of its potential returns per unit of risk. Neonode is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  685.00  in Neonode on September 1, 2024 and sell it today you would earn a total of  135.00  from holding Neonode or generate 19.71% return on investment over 90 days.

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

Ribbon Communications  vs.  Neonode

Ribbon Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ribbon Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, Ribbon Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Neonode

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Neonode are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Neonode displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ribbon Communications and Neonode

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

The idea behind Ribbon Communications and Neonode 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.