Correlation Between Akamai Technologies and Gen Digital

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

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

Diversification Opportunities for Akamai Technologies and Gen Digital

0.45

Correlation Coefficient

Akamai Technologies  Gen Digital

Very weak diversification

The 3 months correlation between Akamai and Gen is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies and Gen Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gen Digital and Akamai Technologies 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 Akamai Technologies are associated (or correlated) with Gen Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gen Digital has no effect on the direction of Akamai Technologies i.e., Akamai Technologies and Gen Digital go up and down completely randomly.

Pair Corralation between Akamai Technologies and Gen Digital

Given the investment horizon of 90 days Akamai Technologies is expected to under-perform the Gen Digital. But the stock apears to be less risky and, when comparing its historical volatility, Akamai Technologies is 1.39 times less risky than Gen Digital. The stock trades about -0.23 of its potential returns per unit of risk. The Gen Digital is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  2,190  in Gen Digital on January 26, 2024 and sell it today you would lose (107.00) from holding Gen Digital or give up 4.89% of portfolio value over 90 days.

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

Akamai Technologies  vs.  Gen Digital

Akamai Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akamai Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators 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.

Gen Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gen Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Akamai Technologies and Gen Digital

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

The idea behind Akamai Technologies and Gen Digital 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.