Correlation Between Halliburton and Ribbon Communications

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Can any of the company-specific risk be diversified away by investing in both Halliburton 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 Halliburton and Ribbon Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Halliburton and Ribbon Communications, you can compare the effects of market volatilities on Halliburton 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 Halliburton with a short position of Ribbon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Halliburton and Ribbon Communications.

Diversification Opportunities for Halliburton and Ribbon Communications

  Correlation Coefficient

Very good diversification

The 3 months correlation between Halliburton and Ribbon is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Halliburton and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications and Halliburton 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 Halliburton 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 Halliburton i.e., Halliburton and Ribbon Communications go up and down completely randomly.

Pair Corralation between Halliburton and Ribbon Communications

Considering the 90-day investment horizon Halliburton is expected to generate 0.76 times more return on investment than Ribbon Communications. However, Halliburton is 1.31 times less risky than Ribbon Communications. It trades about 0.05 of its potential returns per unit of risk. Ribbon Communications is currently generating about -0.01 per unit of risk. If you would invest  2,016  in Halliburton on December 22, 2022 and sell it today you would earn a total of  1,136  from holding Halliburton or generate 56.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
ValuesDaily Returns

Halliburton  vs.  Ribbon Communications

 Performance (%) 

Halliburton Performance

0 of 100

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Ribbon Communications 

Ribbon Performance

12 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Ribbon Communications are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental drivers, Ribbon Communications displayed solid returns over the last few months and may actually be approaching a breakup point.

Halliburton and Ribbon Communications Volatility Contrast

   Predicted Return Density   

Pair Trading with Halliburton and Ribbon Communications

The main advantage of trading using opposite Halliburton and Ribbon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Halliburton 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.
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The idea behind Halliburton 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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