Correlation Between Associated British and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Spirent Communications plc, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Spirent Communications.
Diversification Opportunities for Associated British and Spirent Communications
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Associated and Spirent is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Spirent Communications go up and down completely randomly.
Pair Corralation between Associated British and Spirent Communications
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the Spirent Communications. In addition to that, Associated British is 1.35 times more volatile than Spirent Communications plc. It trades about -0.09 of its total potential returns per unit of risk. Spirent Communications plc is currently generating about 0.0 per unit of volatility. If you would invest 17,650 in Spirent Communications plc on October 21, 2024 and sell it today you would lose (10.00) from holding Spirent Communications plc or give up 0.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Spirent Communications plc
Performance |
| Timeline |
| Associated British Foods |
| Spirent Communications |
Associated British and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Spirent Communications
The main advantage of trading using opposite Associated British and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Charter Communications Cl | Associated British vs. Fonix Mobile plc | Associated British vs. Batm Advanced Communications | Associated British vs. PPHE Hotel Group |
| Spirent Communications vs. Manulife Financial Corp | Spirent Communications vs. Moneta Money Bank | Spirent Communications vs. Raymond James Financial | Spirent Communications vs. CNH Industrial NV |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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