Correlation Between Radcom and ADTRAN

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

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

Diversification Opportunities for Radcom and ADTRAN

0.61

Correlation Coefficient

Radcom  ADTRAN

Poor diversification

The 3 months correlation between Radcom and ADTRAN is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and ADTRAN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADTRAN Inc and Radcom 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 Radcom are associated (or correlated) with ADTRAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADTRAN Inc has no effect on the direction of Radcom i.e., Radcom and ADTRAN go up and down completely randomly.

Pair Corralation between Radcom and ADTRAN

Given the investment horizon of 90 days Radcom is expected to generate 11.24 times less return on investment than ADTRAN. But when comparing it to its historical volatility, Radcom is 1.21 times less risky than ADTRAN. It trades about 0.01 of its potential returns per unit of risk. ADTRAN Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  813.00  in ADTRAN Inc on May 16, 2025 and sell it today you would earn a total of  119.00  from holding ADTRAN Inc or generate 14.64% return on investment over 90 days.

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

Radcom  vs.  ADTRAN Inc

Radcom

Risk-Adjusted Performance

Weakest

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

ADTRAN Inc

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in ADTRAN Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, ADTRAN displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Radcom and ADTRAN

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

The idea behind Radcom and ADTRAN Inc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.