Correlation Between Bandwidth and Alarm Holdings

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

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

Diversification Opportunities for Bandwidth and Alarm Holdings

0.03

Correlation Coefficient

Bandwidth  Alarm Holdings

Significant diversification

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

Pair Corralation between Bandwidth and Alarm Holdings

Given the investment horizon of 90 days Bandwidth is expected to generate 2.37 times more return on investment than Alarm Holdings. However, Bandwidth is 2.37 times more volatile than Alarm Holdings. It trades about 0.02 of its potential returns per unit of risk. Alarm Holdings is currently generating about -0.03 per unit of risk. If you would invest  1,419  in Bandwidth on May 17, 2025 and sell it today you would earn a total of  5.00  from holding Bandwidth or generate 0.35% return on investment over 90 days.

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

Bandwidth  vs.  Alarm Holdings

Bandwidth

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bandwidth are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Bandwidth is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Alarm Holdings

Risk-Adjusted Performance

Weakest

Over the last 90 days Alarm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alarm Holdings is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bandwidth and Alarm Holdings

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

The idea behind Bandwidth and Alarm Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..