Correlation Between Ceragon Networks and Royce Small-cap

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

By analyzing existing cross correlation between Ceragon Networks and Royce Small Cap Value, you can compare the effects of market volatilities on Ceragon Networks and Royce Small-cap 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 Royce Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ceragon Networks and Royce Small-cap.

Diversification Opportunities for Ceragon Networks and Royce Small-cap

0.51

Correlation Coefficient

Ceragon Networks  Royce Small-cap

Very weak diversification

The 3 months correlation between Ceragon and Royce is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ceragon Networks and Royce Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Small Cap 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 Royce Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Small Cap has no effect on the direction of Ceragon Networks i.e., Ceragon Networks and Royce Small-cap go up and down completely randomly.

Pair Corralation between Ceragon Networks and Royce Small-cap

Given the investment horizon of 90 days Ceragon Networks is expected to generate 3.56 times more return on investment than Royce Small-cap. However, Ceragon Networks is 3.56 times more volatile than Royce Small Cap Value. It trades about 0.51 of its potential returns per unit of risk. Royce Small Cap Value is currently generating about 0.25 per unit of risk. If you would invest  242.00  in Ceragon Networks on September 4, 2024 and sell it today you would earn a total of  197.00  from holding Ceragon Networks or generate 81.4% return on investment over 90 days.

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

Ceragon Networks  vs.  Royce Small Cap Value

Ceragon Networks

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ceragon Networks are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Ceragon Networks unveiled solid returns over the last few months and may actually be approaching a breakup point.

Royce Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Small Cap Value are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Royce Small-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ceragon Networks and Royce Small-cap

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

The idea behind Ceragon Networks and Royce Small Cap Value 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.