Correlation Between Cembra Money and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both Cembra Money and Spirent Communications 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 Cembra Money and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cembra Money Bank and Spirent Communications plc, you can compare the effects of market volatilities on Cembra Money and Spirent Communications 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 Cembra Money with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cembra Money and Spirent Communications.
Diversification Opportunities for Cembra Money and Spirent Communications
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cembra and Spirent is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cembra Money Bank and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Cembra Money 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 Cembra Money Bank are associated (or correlated) with Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Cembra Money i.e., Cembra Money and Spirent Communications go up and down completely randomly.
Pair Corralation between Cembra Money and Spirent Communications
Assuming the 90 days trading horizon Cembra Money Bank is expected to generate 0.78 times more return on investment than Spirent Communications. However, Cembra Money Bank is 1.28 times less risky than Spirent Communications. It trades about 0.55 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.14 per unit of risk. If you would invest 8,154 in Cembra Money Bank on October 28, 2024 and sell it today you would earn a total of 726.00 from holding Cembra Money Bank or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cembra Money Bank vs. Spirent Communications plc
Performance |
| Timeline |
| Cembra Money Bank |
| Spirent Communications |
Cembra Money and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cembra Money and Spirent Communications
The main advantage of trading using opposite Cembra Money and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cembra Money position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.| Cembra Money vs. New Residential Investment | Cembra Money vs. Micron Technology | Cembra Money vs. Bankers Investment Trust | Cembra Money vs. Seraphim Space Investment |
| Spirent Communications vs. Toyota Motor Corp | Spirent Communications vs. SoftBank Group Corp | Spirent Communications vs. Halyk Bank of | Spirent Communications vs. Samsung Electronics Co |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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