Correlation Between Ciena Corp and Zebra Technologies

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

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

Diversification Opportunities for Ciena Corp and Zebra Technologies

-0.29

Correlation Coefficient

Ciena Corp  Zebra Technologies

Very good diversification

The 3 months correlation between Ciena and Zebra is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ciena Corp and Zebra Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zebra Technologies and Ciena Corp 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 Ciena Corp are associated (or correlated) with Zebra Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zebra Technologies has no effect on the direction of Ciena Corp i.e., Ciena Corp and Zebra Technologies go up and down completely randomly.

Pair Corralation between Ciena Corp and Zebra Technologies

Given the investment horizon of 90 days Ciena Corp is expected to under-perform the Zebra Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Ciena Corp is 1.16 times less risky than Zebra Technologies. The stock trades about -0.34 of its potential returns per unit of risk. The Zebra Technologies is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  29,794  in Zebra Technologies on January 24, 2024 and sell it today you would lose (2,138) from holding Zebra Technologies or give up 7.18% of portfolio value over 90 days.

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

Ciena Corp  vs.  Zebra Technologies

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.

Zebra Technologies

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zebra Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Zebra Technologies may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Ciena Corp and Zebra Technologies

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

The idea behind Ciena Corp and Zebra Technologies 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.