Correlation Between Agency and Abovenet Communications

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

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

Diversification Opportunities for Agency and Abovenet Communications

0.0

Correlation Coefficient

Agency  Abovenet Communications

Pay attention - limited upside

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

Pair Corralation between Agency and Abovenet Communications

If you would invest (100.00) in Abovenet Communications on January 19, 2024 and sell it today you would earn a total of  100.00  from holding Abovenet Communications or generate -100.0% return on investment over 90 days.

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

Agency Com  vs.  Abovenet Communications

Agency Com

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agency Com has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Agency is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Abovenet Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abovenet Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Abovenet Communications is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Agency and Abovenet Communications

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

The idea behind Agency Com and Abovenet Communications 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.