Correlation Between Super Micro and Ciena Corp

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

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

Diversification Opportunities for Super Micro and Ciena Corp

-0.35

Correlation Coefficient

Super Micro  Ciena Corp

Very good diversification

The 3 months correlation between Super and Ciena is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Super Micro Computer and Ciena Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciena Corp and Super Micro 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 Super Micro Computer 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 Super Micro i.e., Super Micro and Ciena Corp go up and down completely randomly.

Pair Corralation between Super Micro and Ciena Corp

Given the investment horizon of 90 days Super Micro Computer is expected to generate 3.59 times more return on investment than Ciena Corp. However, Super Micro is 3.59 times more volatile than Ciena Corp. It trades about 0.27 of its potential returns per unit of risk. Ciena Corp is currently generating about 0.22 per unit of risk. If you would invest  2,170  in Super Micro Computer on September 13, 2024 and sell it today you would earn a total of  1,619  from holding Super Micro Computer or generate 74.61% return on investment over 90 days.

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

Super Micro Computer  vs.  Ciena Corp

Super Micro Computer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Super Micro Computer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Super Micro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ciena Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ciena Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak 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 Super Micro and Ciena Corp

The main advantage of trading using opposite Super Micro and Ciena Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Super Micro 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 Super Micro Computer 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.