Correlation Between Fathom Digital and AudioCodes

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

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

Diversification Opportunities for Fathom Digital and AudioCodes

-0.75

Correlation Coefficient

Fathom Digital  AudioCodes

Pay attention - limited upside

The 3 months correlation between Fathom and AudioCodes is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fathom Digital Manufacturing and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes and Fathom Digital 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 Fathom Digital Manufacturing 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 Fathom Digital i.e., Fathom Digital and AudioCodes go up and down completely randomly.

Pair Corralation between Fathom Digital and AudioCodes

Given the investment horizon of 90 days Fathom Digital Manufacturing is expected to generate 0.98 times more return on investment than AudioCodes. However, Fathom Digital Manufacturing is 1.02 times less risky than AudioCodes. It trades about 0.11 of its potential returns per unit of risk. AudioCodes is currently generating about -0.17 per unit of risk. If you would invest  442.00  in Fathom Digital Manufacturing on March 5, 2024 and sell it today you would earn a total of  63.00  from holding Fathom Digital Manufacturing or generate 14.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	88.89%
Values	Daily Returns

Fathom Digital Manufacturing  vs.  AudioCodes

Fathom Digital Manuf

Risk-Adjusted Performance

0 of 100

OK

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

Pair Trading with Fathom Digital and AudioCodes

The main advantage of trading using opposite Fathom Digital and AudioCodes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fathom Digital 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 Fathom Digital Manufacturing 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.

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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.