Correlation Between Ceragon Networks and NextSource Materials

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

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

Diversification Opportunities for Ceragon Networks and NextSource Materials

0.95

Correlation Coefficient

Ceragon Networks  NextSource Materials

Almost no diversification

The 3 months correlation between Ceragon and NextSource is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Ceragon Networks and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials and Ceragon 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 Ceragon Networks are associated (or correlated) with NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of Ceragon Networks i.e., Ceragon Networks and NextSource Materials go up and down completely randomly.

Pair Corralation between Ceragon Networks and NextSource Materials

Given the investment horizon of 90 days Ceragon Networks is expected to under-perform the NextSource Materials. But the stock apears to be less risky and, when comparing its historical volatility, Ceragon Networks is 1.18 times less risky than NextSource Materials. The stock trades about -0.18 of its potential returns per unit of risk. The NextSource Materials is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  51.00  in NextSource Materials on December 30, 2024 and sell it today you would lose (22.00) from holding NextSource Materials or give up 43.14% of portfolio value over 90 days.

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

Ceragon Networks  vs.  NextSource Materials

Ceragon Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ceragon Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

NextSource Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days NextSource Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ceragon Networks and NextSource Materials

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

The idea behind Ceragon Networks and NextSource Materials 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.