Correlation Between Cavium and ViaSat

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Can any of the company-specific risk be diversified away by investing in both Cavium and ViaSat 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 Cavium and ViaSat into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cavium Inc and ViaSat Inc, you can compare the effects of market volatilities on Cavium and ViaSat 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 Cavium with a short position of ViaSat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cavium and ViaSat.

Diversification Opportunities for Cavium and ViaSat

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Cavium and ViaSat is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cavium Inc and ViaSat Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ViaSat Inc and Cavium 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 Cavium Inc are associated (or correlated) with ViaSat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ViaSat Inc has no effect on the direction of Cavium i.e., Cavium and ViaSat go up and down completely randomly.

Pair Corralation between Cavium and ViaSat

If you would invest (100.00) in Cavium Inc on December 29, 2023 and sell it today you would earn a total of  100.00  from holding Cavium Inc or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Cavium Inc  vs.  ViaSat Inc

 Performance 
       Timeline  
Cavium Inc 

Risk-Adjusted Performance

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

Risk-Adjusted Performance

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Over the last 90 days ViaSat Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cavium and ViaSat Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cavium and ViaSat

The main advantage of trading using opposite Cavium and ViaSat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cavium position performs unexpectedly, ViaSat 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 ViaSat will offset losses from the drop in ViaSat's long position.
The idea behind Cavium Inc and ViaSat 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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