Correlation Between Shenandoah Telecommunicatio and Ubiquiti Networks

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

By analyzing existing cross correlation between Shenandoah Telecommunications Co and Ubiquiti Networks, you can compare the effects of market volatilities on Shenandoah Telecommunicatio and Ubiquiti Networks 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 Shenandoah Telecommunicatio with a short position of Ubiquiti Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shenandoah Telecommunicatio and Ubiquiti Networks.

Diversification Opportunities for Shenandoah Telecommunicatio and Ubiquiti Networks

0.8

Correlation Coefficient

Shenandoah Telecommunicatio  Ubiquiti Networks

Very poor diversification

The 3 months correlation between Shenandoah and Ubiquiti is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Shenandoah Telecommunications and Ubiquiti Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubiquiti Networks and Shenandoah Telecommunicatio 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 Shenandoah Telecommunications Co are associated (or correlated) with Ubiquiti Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubiquiti Networks has no effect on the direction of Shenandoah Telecommunicatio i.e., Shenandoah Telecommunicatio and Ubiquiti Networks go up and down completely randomly.

Pair Corralation between Shenandoah Telecommunicatio and Ubiquiti Networks

Given the investment horizon of 90 days Shenandoah Telecommunicatio is expected to generate 1.13 times less return on investment than Ubiquiti Networks. In addition to that, Shenandoah Telecommunicatio is 1.49 times more volatile than Ubiquiti Networks. It trades about 0.14 of its total potential returns per unit of risk. Ubiquiti Networks is currently generating about 0.24 per unit of volatility. If you would invest  11,261  in Ubiquiti Networks on February 11, 2024 and sell it today you would earn a total of  1,458  from holding Ubiquiti Networks or generate 12.95% return on investment over 90 days.

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

Shenandoah Telecommunications   vs.  Ubiquiti Networks

Shenandoah Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenandoah Telecommunications Co 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ubiquiti Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ubiquiti Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Ubiquiti Networks is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Shenandoah Telecommunicatio and Ubiquiti Networks

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

The idea behind Shenandoah Telecommunications Co and Ubiquiti Networks 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.