Correlation Between Amphenol and AudioCodes

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

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

Diversification Opportunities for Amphenol and AudioCodes

-0.77

Correlation Coefficient

Amphenol  AudioCodes

Pay attention - limited upside

The 3 months correlation between Amphenol and AudioCodes is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Amphenol and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes 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 AudioCodes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioCodes has no effect on the direction of Amphenol i.e., Amphenol and AudioCodes go up and down completely randomly.

Pair Corralation between Amphenol and AudioCodes

Considering the 90-day investment horizon Amphenol is expected to generate 0.33 times more return on investment than AudioCodes. However, Amphenol is 3.02 times less risky than AudioCodes. It trades about 0.74 of its potential returns per unit of risk. AudioCodes is currently generating about -0.05 per unit of risk. If you would invest  11,186  in Amphenol on February 22, 2024 and sell it today you would earn a total of  2,271  from holding Amphenol or generate 20.3% return on investment over 90 days.

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

Amphenol  vs.  AudioCodes

Amphenol

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Amphenol are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Amphenol demonstrated solid returns over the last few months and may actually be approaching a breakup point.

AudioCodes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AudioCodes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Amphenol and AudioCodes

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

The idea behind Amphenol and AudioCodes 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.