Correlation Between Ciena Corp and Telefonaktiebolaget

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

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

Diversification Opportunities for Ciena Corp and Telefonaktiebolaget

-0.63

Correlation Coefficient

Ciena Corp  Telefonaktiebolaget

Excellent diversification

The 3 months correlation between Ciena and Telefonaktiebolaget is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ciena Corp and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget 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 Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Ciena Corp i.e., Ciena Corp and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Ciena Corp and Telefonaktiebolaget

Given the investment horizon of 90 days Ciena Corp is expected to generate 1.61 times more return on investment than Telefonaktiebolaget. However, Ciena Corp is 1.61 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.16 of its potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about -0.12 per unit of risk. If you would invest  7,334  in Ciena Corp on May 7, 2025 and sell it today you would earn a total of  1,933  from holding Ciena Corp or generate 26.36% return on investment over 90 days.

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

Ciena Corp  vs.  Telefonaktiebolaget LM Ericsso

Ciena Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ciena Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Ciena Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Telefonaktiebolaget

Risk-Adjusted Performance

Weakest

Over the last 90 days Telefonaktiebolaget LM Ericsson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ciena Corp and Telefonaktiebolaget

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

The idea behind Ciena Corp and Telefonaktiebolaget LM Ericsson 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.