Correlation Between AAP and Ciena Corp
Can any of the company-specific risk be diversified away by investing in both AAP and Ciena Corp 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 AAP and Ciena Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAP Inc and Ciena Corp, you can compare the effects of market volatilities on AAP and Ciena Corp 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 AAP with a short position of Ciena Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAP and Ciena Corp.
Diversification Opportunities for AAP and Ciena Corp
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AAP and Ciena is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding AAP Inc and Ciena Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciena Corp and AAP 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 AAP Inc are associated (or correlated) with Ciena Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ciena Corp has no effect on the direction of AAP i.e., AAP and Ciena Corp go up and down completely randomly.
Pair Corralation between AAP and Ciena Corp
Given the investment horizon of 90 days AAP Inc is expected to generate 12.82 times more return on investment than Ciena Corp. However, AAP is 12.82 times more volatile than Ciena Corp. It trades about 0.1 of its potential returns per unit of risk. Ciena Corp is currently generating about 0.07 per unit of risk. If you would invest 0.26 in AAP Inc on August 31, 2024 and sell it today you would lose (0.24) from holding AAP Inc or give up 92.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAP Inc vs. Ciena Corp
Performance |
| Timeline |
| AAP Inc |
| Ciena Corp |
AAP and Ciena Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAP and Ciena Corp
The main advantage of trading using opposite AAP and Ciena Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAP position performs unexpectedly, Ciena Corp 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 Ciena Corp will offset losses from the drop in Ciena Corp's long position.| AAP vs. Baylin Technologies | AAP vs. Viavi Solutions | AAP vs. SatixFy Communications | AAP vs. Electronic Systems Technology |
| Ciena Corp vs. Extreme Networks | Ciena Corp vs. Hewlett Packard Enterprise | Ciena Corp vs. NETGEAR | Ciena Corp vs. Motorola Solutions |
Check out your portfolio center.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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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