Correlation Between Optical Cable and EchoStar

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

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

Diversification Opportunities for Optical Cable and EchoStar

0.14

Correlation Coefficient

Optical Cable  EchoStar

Average diversification

The 3 months correlation between Optical and EchoStar is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Optical Cable and EchoStar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EchoStar and Optical Cable 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 Optical Cable are associated (or correlated) with EchoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EchoStar has no effect on the direction of Optical Cable i.e., Optical Cable and EchoStar go up and down completely randomly.

Pair Corralation between Optical Cable and EchoStar

Considering the 90-day investment horizon Optical Cable is expected to generate 27.83 times less return on investment than EchoStar. In addition to that, Optical Cable is 1.23 times more volatile than EchoStar. It trades about 0.01 of its total potential returns per unit of risk. EchoStar is currently generating about 0.47 per unit of volatility. If you would invest  1,351  in EchoStar on February 4, 2024 and sell it today you would earn a total of  394.00  from holding EchoStar or generate 29.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Optical Cable  vs.  EchoStar

Optical Cable

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Optical Cable are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Optical Cable may actually be approaching a critical reversion point that can send shares even higher in June 2024.

EchoStar

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Optical Cable and EchoStar

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

The idea behind Optical Cable and EchoStar 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.