Correlation Between Ciena Corp and Gilat Satellite

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

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

Diversification Opportunities for Ciena Corp and Gilat Satellite

0.83

Correlation Coefficient

Ciena Corp  Gilat Satellite

Very poor diversification

The 3 months correlation between Ciena and Gilat is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ciena Corp and Gilat Satellite Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Satellite Networks 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 Gilat Satellite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Satellite Networks has no effect on the direction of Ciena Corp i.e., Ciena Corp and Gilat Satellite go up and down completely randomly.

Pair Corralation between Ciena Corp and Gilat Satellite

Given the investment horizon of 90 days Ciena Corp is expected to generate 0.79 times more return on investment than Gilat Satellite. However, Ciena Corp is 1.26 times less risky than Gilat Satellite. It trades about 0.17 of its potential returns per unit of risk. Gilat Satellite Networks is currently generating about 0.13 per unit of risk. If you would invest  5,535  in Ciena Corp on September 2, 2024 and sell it today you would earn a total of  1,437  from holding Ciena Corp or generate 25.96% return on investment over 90 days.

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

Ciena Corp  vs.  Gilat Satellite Networks

Ciena Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ciena Corp are ranked lower than 13 (%) 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.

Gilat Satellite Networks

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gilat Satellite Networks are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Gilat Satellite unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ciena Corp and Gilat Satellite

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

The idea behind Ciena Corp and Gilat Satellite Networks 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.