Correlation Between Clearfield and Ciena Corp

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

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

Diversification Opportunities for Clearfield and Ciena Corp

-0.57

Correlation Coefficient

Clearfield  Ciena Corp

Excellent diversification

The 3 months correlation between Clearfield and Ciena is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Clearfield and Ciena Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciena Corp and Clearfield 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 Clearfield are associated (or correlated) with Ciena Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ciena Corp has no effect on the direction of Clearfield i.e., Clearfield and Ciena Corp go up and down completely randomly.

Pair Corralation between Clearfield and Ciena Corp

Given the investment horizon of 90 days Clearfield is expected to under-perform the Ciena Corp. In addition to that, Clearfield is 1.6 times more volatile than Ciena Corp. It trades about -0.2 of its total potential returns per unit of risk. Ciena Corp is currently generating about 0.24 per unit of volatility. If you would invest  6,324  in Ciena Corp on September 3, 2024 and sell it today you would earn a total of  648.00  from holding Ciena Corp or generate 10.25% return on investment over 90 days.

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

Clearfield  vs.  Ciena Corp

Clearfield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with Clearfield and Ciena Corp

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

The idea behind Clearfield and Ciena 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.