Correlation Between Amphenol and ADTRAN

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

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

Diversification Opportunities for Amphenol and ADTRAN

-0.87

Correlation Coefficient

Amphenol  ADTRAN

Pay attention - limited upside

The 3 months correlation between Amphenol and ADTRAN is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Amphenol and ADTRAN Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADTRAN Inc and Amphenol 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 Amphenol are associated (or correlated) with ADTRAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADTRAN Inc has no effect on the direction of Amphenol i.e., Amphenol and ADTRAN go up and down completely randomly.

Pair Corralation between Amphenol and ADTRAN

Considering the 90-day investment horizon Amphenol is expected to generate 0.32 times more return on investment than ADTRAN. However, Amphenol is 3.1 times less risky than ADTRAN. It trades about 0.16 of its potential returns per unit of risk. ADTRAN Inc is currently generating about -0.05 per unit of risk. If you would invest  7,574  in Amphenol on January 26, 2024 and sell it today you would earn a total of  4,057  from holding Amphenol or generate 53.56% return on investment over 90 days.

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

Amphenol  vs.  ADTRAN Inc

Amphenol

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amphenol are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Amphenol demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ADTRAN Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADTRAN Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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.

Pair Trading with Amphenol and ADTRAN

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

The idea behind Amphenol and ADTRAN 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 Transaction History module to view history of all your transactions and understand their impact on performance.