Correlation Between CEVA and GSI Technology

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

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

Diversification Opportunities for CEVA and GSI Technology

0.46

Correlation Coefficient

CEVA  GSI Technology

Very weak diversification

The 3 months correlation between CEVA and GSI is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding CEVA Inc and GSI Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSI Technology and CEVA 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 CEVA Inc are associated (or correlated) with GSI Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSI Technology has no effect on the direction of CEVA i.e., CEVA and GSI Technology go up and down completely randomly.

Pair Corralation between CEVA and GSI Technology

Given the investment horizon of 90 days CEVA Inc is expected to generate 0.37 times more return on investment than GSI Technology. However, CEVA Inc is 2.7 times less risky than GSI Technology. It trades about 0.09 of its potential returns per unit of risk. GSI Technology is currently generating about 0.01 per unit of risk. If you would invest  2,974  in CEVA Inc on November 28, 2024 and sell it today you would earn a total of  395.00  from holding CEVA Inc or generate 13.28% return on investment over 90 days.

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

CEVA Inc  vs.  GSI Technology

CEVA Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CEVA Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CEVA sustained solid returns over the last few months and may actually be approaching a breakup point.

GSI Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days GSI Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, GSI Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CEVA and GSI Technology

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

The idea behind CEVA Inc and GSI Technology 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.