Correlation Between Hewlett Packard and Ciena Corp

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

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

Diversification Opportunities for Hewlett Packard and Ciena Corp

0.91

Correlation Coefficient

Hewlett Packard  Ciena Corp

Almost no diversification

The 3 months correlation between Hewlett and Ciena is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and Ciena Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciena Corp and Hewlett Packard 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 Hewlett Packard Enterprise 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 Hewlett Packard i.e., Hewlett Packard and Ciena Corp go up and down completely randomly.

Pair Corralation between Hewlett Packard and Ciena Corp

Considering the 90-day investment horizon Hewlett Packard is expected to generate 1.02 times less return on investment than Ciena Corp. In addition to that, Hewlett Packard is 1.18 times more volatile than Ciena Corp. It trades about 0.17 of its total potential returns per unit of risk. Ciena Corp is currently generating about 0.2 per unit of volatility. If you would invest  5,617  in Ciena Corp on September 13, 2024 and sell it today you would earn a total of  1,704  from holding Ciena Corp or generate 30.34% return on investment over 90 days.

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

Hewlett Packard Enterprise  vs.  Ciena Corp

Hewlett Packard Ente

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Hewlett Packard exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Hewlett Packard and Ciena Corp

The main advantage of trading using opposite Hewlett Packard and Ciena Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard 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 Hewlett Packard Enterprise 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.