Correlation Between Ambarella and CommScope Holding

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

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

Diversification Opportunities for Ambarella and CommScope Holding

0.88

Correlation Coefficient

Ambarella  CommScope Holding

Very poor diversification

The 3 months correlation between Ambarella and CommScope is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ambarella and CommScope Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CommScope Holding and Ambarella 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 Ambarella are associated (or correlated) with CommScope Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CommScope Holding has no effect on the direction of Ambarella i.e., Ambarella and CommScope Holding go up and down completely randomly.

Pair Corralation between Ambarella and CommScope Holding

Given the investment horizon of 90 days Ambarella is expected to generate 1.13 times more return on investment than CommScope Holding. However, Ambarella is 1.13 times more volatile than CommScope Holding Co. It trades about 0.28 of its potential returns per unit of risk. CommScope Holding Co is currently generating about 0.19 per unit of risk. If you would invest  5,157  in Ambarella on April 23, 2025 and sell it today you would earn a total of  1,655  from holding Ambarella or generate 32.09% return on investment over 90 days.

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

Ambarella  vs.  CommScope Holding Co

Ambarella

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ambarella are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Ambarella sustained solid returns over the last few months and may actually be approaching a breakup point.

CommScope Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CommScope Holding Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, CommScope Holding displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ambarella and CommScope Holding

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

The idea behind Ambarella and CommScope Holding Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.