Correlation Between Cepton and Coherent

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

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

Diversification Opportunities for Cepton and Coherent

0.8

Correlation Coefficient

Cepton  Coherent

Very poor diversification

The 3 months correlation between Cepton and Coherent is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cepton Inc and Coherent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coherent and Cepton 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 Cepton Inc are associated (or correlated) with Coherent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coherent has no effect on the direction of Cepton i.e., Cepton and Coherent go up and down completely randomly.

Pair Corralation between Cepton and Coherent

Given the investment horizon of 90 days Cepton is expected to generate 9.93 times less return on investment than Coherent. But when comparing it to its historical volatility, Cepton Inc is 6.98 times less risky than Coherent. It trades about 0.13 of its potential returns per unit of risk. Coherent is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7,426  in Coherent on September 5, 2024 and sell it today you would earn a total of  3,228  from holding Coherent or generate 43.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Cepton Inc  vs.  Coherent

Cepton Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cepton Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cepton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Coherent

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coherent are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Coherent reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cepton and Coherent

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

The idea behind Cepton Inc and Coherent 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.