Correlation Between Ceragon Networks and Europa Metals

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

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

Diversification Opportunities for Ceragon Networks and Europa Metals

0.08

Correlation Coefficient

Ceragon Networks  Europa Metals

Significant diversification

The 3 months correlation between Ceragon and Europa is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ceragon Networks and Europa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europa Metals and Ceragon Networks 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 Ceragon Networks are associated (or correlated) with Europa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europa Metals has no effect on the direction of Ceragon Networks i.e., Ceragon Networks and Europa Metals go up and down completely randomly.

Pair Corralation between Ceragon Networks and Europa Metals

Given the investment horizon of 90 days Ceragon Networks is expected to generate 9.62 times more return on investment than Europa Metals. However, Ceragon Networks is 9.62 times more volatile than Europa Metals. It trades about 0.15 of its potential returns per unit of risk. Europa Metals is currently generating about -0.18 per unit of risk. If you would invest  294.00  in Ceragon Networks on September 4, 2024 and sell it today you would earn a total of  122.00  from holding Ceragon Networks or generate 41.5% return on investment over 90 days.

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

Ceragon Networks  vs.  Europa Metals

Ceragon Networks

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ceragon Networks are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Ceragon Networks unveiled solid returns over the last few months and may actually be approaching a breakup point.

Europa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Europa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Europa Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ceragon Networks and Europa Metals

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

The idea behind Ceragon Networks and Europa Metals 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.