Correlation Between BHP Group and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both BHP Group 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 BHP Group and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP Group Limited and Spirent Communications plc, you can compare the effects of market volatilities on BHP Group 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 BHP Group with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Spirent Communications.
Diversification Opportunities for BHP Group and Spirent Communications
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between BHP and Spirent is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and BHP Group 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 BHP Group Limited 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 BHP Group i.e., BHP Group and Spirent Communications go up and down completely randomly.
Pair Corralation between BHP Group and Spirent Communications
Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the Spirent Communications. In addition to that, BHP Group is 1.29 times more volatile than Spirent Communications plc. It trades about -0.08 of its total potential returns per unit of risk. Spirent Communications plc is currently generating about 0.2 per unit of volatility. If you would invest 16,950 in Spirent Communications plc on September 5, 2024 and sell it today you would earn a total of 850.00 from holding Spirent Communications plc or generate 5.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BHP Group Limited vs. Spirent Communications plc
Performance |
| Timeline |
| BHP Group Limited |
| Spirent Communications |
BHP Group and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Spirent Communications
The main advantage of trading using opposite BHP Group and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group 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.| BHP Group vs. Spirent Communications plc | BHP Group vs. Aeorema Communications Plc | BHP Group vs. Cairo Communication SpA | BHP Group vs. Infrastrutture Wireless Italiane |
| Spirent Communications vs. Berkshire Hathaway | Spirent Communications vs. Hyundai Motor | Spirent Communications vs. Samsung Electronics Co | 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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