Correlation Between Intel and Ciena Corp

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

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

Diversification Opportunities for Intel and Ciena Corp

0.65

Correlation Coefficient

Intel  Ciena Corp

Poor diversification

The 3 months correlation between Intel and Ciena is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Ciena Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciena Corp and Intel 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 Intel 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 Intel i.e., Intel and Ciena Corp go up and down completely randomly.

Pair Corralation between Intel and Ciena Corp

Given the investment horizon of 90 days Intel is expected to under-perform the Ciena Corp. But the stock apears to be less risky and, when comparing its historical volatility, Intel is 1.01 times less risky than Ciena Corp. The stock trades about -0.19 of its potential returns per unit of risk. The Ciena Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  5,445  in Ciena Corp on February 19, 2024 and sell it today you would lose (560.00) from holding Ciena Corp or give up 10.28% of portfolio value over 90 days.

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

Intel  vs.  Ciena Corp

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ciena Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ciena Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Intel and Ciena Corp

The main advantage of trading using opposite Intel and Ciena Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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 Intel 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.