Correlation Between Ciena Corp and Infinera

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

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

Diversification Opportunities for Ciena Corp and Infinera

-0.06

Correlation Coefficient

Ciena Corp  Infinera

Good diversification

The 3 months correlation between Ciena and Infinera is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ciena Corp and Infinera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinera 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 Infinera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinera has no effect on the direction of Ciena Corp i.e., Ciena Corp and Infinera go up and down completely randomly.

Pair Corralation between Ciena Corp and Infinera

Given the investment horizon of 90 days Ciena Corp is expected to generate 14.01 times more return on investment than Infinera. However, Ciena Corp is 14.01 times more volatile than Infinera. It trades about 0.07 of its potential returns per unit of risk. Infinera is currently generating about 0.03 per unit of risk. If you would invest  6,972  in Ciena Corp on November 29, 2024 and sell it today you would earn a total of  832.00  from holding Ciena Corp or generate 11.93% return on investment over 90 days.

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

Ciena Corp  vs.  Infinera

Ciena Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ciena Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Ciena Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Infinera

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Infinera are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Infinera is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ciena Corp and Infinera

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

The idea behind Ciena Corp and Infinera 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.

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 the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.