Correlation Between EMCORE and Aviat Networks

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

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

Diversification Opportunities for EMCORE and Aviat Networks

-0.24

Correlation Coefficient

EMCORE  Aviat Networks

Very good diversification

The 3 months correlation between EMCORE and Aviat is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE and Aviat Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviat Networks and EMCORE 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 EMCORE are associated (or correlated) with Aviat Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviat Networks has no effect on the direction of EMCORE i.e., EMCORE and Aviat Networks go up and down completely randomly.

Pair Corralation between EMCORE and Aviat Networks

Given the investment horizon of 90 days EMCORE is expected to under-perform the Aviat Networks. In addition to that, EMCORE is 1.01 times more volatile than Aviat Networks. It trades about -0.17 of its total potential returns per unit of risk. Aviat Networks is currently generating about -0.17 per unit of volatility. If you would invest  3,522  in Aviat Networks on February 5, 2024 and sell it today you would lose (531.00) from holding Aviat Networks or give up 15.08% of portfolio value over 90 days.

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

EMCORE  vs.  Aviat Networks

EMCORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMCORE has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Aviat Networks

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aviat Networks are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Aviat Networks is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with EMCORE and Aviat Networks

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

The idea behind EMCORE and Aviat Networks 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.