Correlation Between Extreme Networks and TTM Technologies

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

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

Diversification Opportunities for Extreme Networks and TTM Technologies

0.87

Correlation Coefficient

Extreme Networks  TTM Technologies

Very poor diversification

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

Pair Corralation between Extreme Networks and TTM Technologies

Given the investment horizon of 90 days Extreme Networks is expected to generate 1.3 times less return on investment than TTM Technologies. In addition to that, Extreme Networks is 1.34 times more volatile than TTM Technologies. It trades about 0.09 of its total potential returns per unit of risk. TTM Technologies is currently generating about 0.16 per unit of volatility. If you would invest  2,423  in TTM Technologies on September 27, 2024 and sell it today you would earn a total of  136.00  from holding TTM Technologies or generate 5.61% return on investment over 90 days.

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

Extreme Networks  vs.  TTM Technologies

Extreme Networks

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Extreme Networks are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Extreme Networks reported solid returns over the last few months and may actually be approaching a breakup point.

TTM Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TTM Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain primary indicators, TTM Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Extreme Networks and TTM Technologies

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

The idea behind Extreme Networks and TTM Technologies 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.