Correlation Between CEVA and Wolfspeed

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

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

Diversification Opportunities for CEVA and Wolfspeed

-0.29

Correlation Coefficient

CEVA  Wolfspeed

Very good diversification

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

Pair Corralation between CEVA and Wolfspeed

Given the investment horizon of 90 days CEVA is expected to generate 1.28 times less return on investment than Wolfspeed. But when comparing it to its historical volatility, CEVA Inc is 3.33 times less risky than Wolfspeed. It trades about 0.15 of its potential returns per unit of risk. Wolfspeed is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  911.00  in Wolfspeed on September 2, 2024 and sell it today you would earn a total of  47.00  from holding Wolfspeed or generate 5.16% return on investment over 90 days.

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

CEVA Inc  vs.  Wolfspeed

CEVA Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CEVA Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CEVA sustained solid returns over the last few months and may actually be approaching a breakup point.

Wolfspeed

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wolfspeed are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Wolfspeed reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CEVA and Wolfspeed

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

The idea behind CEVA Inc and Wolfspeed 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 Stocks Directory module to find actively traded stocks across global markets.