Correlation Between Extreme Networks and Infinera

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

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

Diversification Opportunities for Extreme Networks and Infinera

0.23

Correlation Coefficient

Extreme Networks  Infinera

Modest diversification

The 3 months correlation between Extreme and Infinera is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Extreme Networks and Infinera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinera and Extreme Networks 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 Extreme Networks are associated (or correlated) with Infinera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinera has no effect on the direction of Extreme Networks i.e., Extreme Networks and Infinera go up and down completely randomly.

Pair Corralation between Extreme Networks and Infinera

Given the investment horizon of 90 days Extreme Networks is expected to under-perform the Infinera. But the stock apears to be less risky and, when comparing its historical volatility, Extreme Networks is 1.18 times less risky than Infinera. The stock trades about 0.0 of its potential returns per unit of risk. The Infinera is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  637.00  in Infinera on August 17, 2024 and sell it today you would earn a total of  27.00  from holding Infinera or generate 4.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Extreme Networks  vs.  Infinera

Extreme Networks

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Extreme Networks are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Extreme Networks may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Infinera

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Infinera are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Infinera may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Extreme Networks and Infinera

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

The idea behind Extreme Networks and Infinera 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.