Correlation Between Airgain and Ribbon Communications

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

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

Diversification Opportunities for Airgain and Ribbon Communications

-0.42

Correlation Coefficient

Airgain  Ribbon Communications

Very good diversification

The 3 months correlation between Airgain and Ribbon is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Airgain and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications and Airgain 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 Airgain are associated (or correlated) with Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of Airgain i.e., Airgain and Ribbon Communications go up and down completely randomly.

Pair Corralation between Airgain and Ribbon Communications

Given the investment horizon of 90 days Airgain is expected to generate 1.01 times more return on investment than Ribbon Communications. However, Airgain is 1.01 times more volatile than Ribbon Communications. It trades about -0.02 of its potential returns per unit of risk. Ribbon Communications is currently generating about -0.43 per unit of risk. If you would invest  547.00  in Airgain on January 24, 2024 and sell it today you would lose (7.00) from holding Airgain or give up 1.28% of portfolio value over 90 days.

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

Airgain  vs.  Ribbon Communications

Airgain

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airgain are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Airgain reported solid returns over the last few months and may actually be approaching a breakup point.

Ribbon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ribbon Communications 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 fundamental drivers remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Airgain and Ribbon Communications

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

The idea behind Airgain and Ribbon 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.

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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.