Correlation Between Smart Global and CEVA

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

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

Diversification Opportunities for Smart Global and CEVA

-0.17

Correlation Coefficient

Smart Global  CEVA

Good diversification

The 3 months correlation between Smart and CEVA is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Smart Global Holdings and CEVA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEVA Inc and Smart Global 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 Smart Global Holdings are associated (or correlated) with CEVA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEVA Inc has no effect on the direction of Smart Global i.e., Smart Global and CEVA go up and down completely randomly.

Pair Corralation between Smart Global and CEVA

Considering the 90-day investment horizon Smart Global is expected to generate 1.79 times less return on investment than CEVA. But when comparing it to its historical volatility, Smart Global Holdings is 1.31 times less risky than CEVA. It trades about 0.11 of its potential returns per unit of risk. CEVA Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,275  in CEVA Inc on September 2, 2024 and sell it today you would earn a total of  699.00  from holding CEVA Inc or generate 30.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

Smart Global Holdings  vs.  CEVA Inc

Smart Global Holdings

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Smart Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unfluctuating technical and fundamental indicators, Smart Global demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Smart Global and CEVA

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

The idea behind Smart Global Holdings and CEVA Inc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.