Correlation Between EMCORE and CEVA

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

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

Diversification Opportunities for EMCORE and CEVA

0.64

Correlation Coefficient

EMCORE  CEVA

Poor diversification

The 3 months correlation between EMCORE and CEVA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE and CEVA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEVA Inc and EMCORE 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 EMCORE are associated (or correlated) with CEVA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEVA Inc has no effect on the direction of EMCORE i.e., EMCORE and CEVA go up and down completely randomly.

Pair Corralation between EMCORE and CEVA

Given the investment horizon of 90 days EMCORE is expected to generate 3.59 times less return on investment than CEVA. But when comparing it to its historical volatility, EMCORE is 6.11 times less risky than CEVA. It trades about 0.14 of its potential returns per unit of risk. CEVA Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,957  in CEVA Inc on December 2, 2024 and sell it today you would earn a total of  469.00  from holding CEVA Inc or generate 15.86% return on investment over 90 days.

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

EMCORE  vs.  CEVA Inc

EMCORE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMCORE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, EMCORE is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

CEVA Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CEVA Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CEVA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMCORE and CEVA

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

The idea behind EMCORE and CEVA Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.