Correlation Between APPLIED MATERIALS and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS 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 APPLIED MATERIALS and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and Spirent Communications plc, you can compare the effects of market volatilities on APPLIED MATERIALS 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 APPLIED MATERIALS with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and Spirent Communications.
Diversification Opportunities for APPLIED MATERIALS and Spirent Communications
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between APPLIED and Spirent is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and Spirent Communications go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and Spirent Communications
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to under-perform the Spirent Communications. In addition to that, APPLIED MATERIALS is 2.49 times more volatile than Spirent Communications plc. It trades about -0.06 of its total potential returns per unit of risk. Spirent Communications plc is currently generating about 0.05 per unit of volatility. If you would invest 202.00 in Spirent Communications plc on August 27, 2024 and sell it today you would earn a total of 2.00 from holding Spirent Communications plc or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
APPLIED MATERIALS vs. Spirent Communications plc
Performance |
| Timeline |
| APPLIED MATERIALS |
| Spirent Communications |
APPLIED MATERIALS and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and Spirent Communications
The main advantage of trading using opposite APPLIED MATERIALS and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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.| APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Microsoft |
| Spirent Communications vs. T Mobile | Spirent Communications vs. ATT Inc | Spirent Communications vs. Deutsche Telekom AG |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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