Correlation Between Ciena Corp and Cambium Networks

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

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

Diversification Opportunities for Ciena Corp and Cambium Networks

-0.75

Correlation Coefficient

Ciena Corp  Cambium Networks

Pay attention - limited upside

The 3 months correlation between Ciena and Cambium is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ciena Corp and Cambium Networks Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambium Networks Corp and Ciena Corp 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 Ciena Corp are associated (or correlated) with Cambium Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambium Networks Corp has no effect on the direction of Ciena Corp i.e., Ciena Corp and Cambium Networks go up and down completely randomly.

Pair Corralation between Ciena Corp and Cambium Networks

Given the investment horizon of 90 days Ciena Corp is expected to generate 0.48 times more return on investment than Cambium Networks. However, Ciena Corp is 2.07 times less risky than Cambium Networks. It trades about 0.17 of its potential returns per unit of risk. Cambium Networks Corp is currently generating about -0.06 per unit of risk. If you would invest  5,535  in Ciena Corp on September 3, 2024 and sell it today you would earn a total of  1,437  from holding Ciena Corp or generate 25.96% return on investment over 90 days.

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

Ciena Corp  vs.  Cambium Networks Corp

Ciena Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ciena Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Ciena Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Cambium Networks Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambium Networks Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ciena Corp and Cambium Networks

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

The idea behind Ciena Corp and Cambium Networks Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.