Correlation Between Optical Cable and Cambium Networks

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

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

Diversification Opportunities for Optical Cable and Cambium Networks

0.8

Correlation Coefficient

Optical Cable  Cambium Networks

Very poor diversification

The 3 months correlation between Optical and Cambium is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Optical Cable and Cambium Networks Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambium Networks Corp and Optical Cable 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 Optical Cable are associated (or correlated) with Cambium Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambium Networks Corp has no effect on the direction of Optical Cable i.e., Optical Cable and Cambium Networks go up and down completely randomly.

Pair Corralation between Optical Cable and Cambium Networks

Considering the 90-day investment horizon Optical Cable is expected to under-perform the Cambium Networks. But the stock apears to be less risky and, when comparing its historical volatility, Optical Cable is 1.92 times less risky than Cambium Networks. The stock trades about -0.31 of its potential returns per unit of risk. The Cambium Networks Corp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  131.00  in Cambium Networks Corp on September 5, 2024 and sell it today you would lose (12.00) from holding Cambium Networks Corp or give up 9.16% of portfolio value over 90 days.

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

Optical Cable  vs.  Cambium Networks Corp

Optical Cable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optical Cable 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 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.

Cambium Networks Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambium Networks Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Optical Cable and Cambium Networks

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

The idea behind Optical Cable and Cambium Networks 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.