Correlation Between Spirent Communications and Alumil Aluminium
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Alumil Aluminium 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 Spirent Communications and Alumil Aluminium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirent Communications plc and Alumil Aluminium Industry, you can compare the effects of market volatilities on Spirent Communications and Alumil Aluminium 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 Spirent Communications with a short position of Alumil Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Alumil Aluminium.
Diversification Opportunities for Spirent Communications and Alumil Aluminium
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Spirent and Alumil is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Alumil Aluminium Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumil Aluminium Industry and Spirent Communications 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 Spirent Communications plc are associated (or correlated) with Alumil Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumil Aluminium Industry has no effect on the direction of Spirent Communications i.e., Spirent Communications and Alumil Aluminium go up and down completely randomly.
Pair Corralation between Spirent Communications and Alumil Aluminium
Assuming the 90 days horizon Spirent Communications plc is expected to generate 2.1 times more return on investment than Alumil Aluminium. However, Spirent Communications is 2.1 times more volatile than Alumil Aluminium Industry. It trades about 0.06 of its potential returns per unit of risk. Alumil Aluminium Industry is currently generating about 0.07 per unit of risk. If you would invest 133.00 in Spirent Communications plc on September 12, 2024 and sell it today you would earn a total of 83.00 from holding Spirent Communications plc or generate 62.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. Alumil Aluminium Industry
Performance |
| Timeline |
| Spirent Communications |
| Alumil Aluminium Industry |
Spirent Communications and Alumil Aluminium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Alumil Aluminium
The main advantage of trading using opposite Spirent Communications and Alumil Aluminium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Alumil Aluminium 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 Alumil Aluminium will offset losses from the drop in Alumil Aluminium's long position.| Spirent Communications vs. Superior Plus Corp | Spirent Communications vs. SIVERS SEMICONDUCTORS AB | Spirent Communications vs. Norsk Hydro ASA | Spirent Communications vs. Reliance Steel Aluminum |
| Alumil Aluminium vs. LION ONE METALS | Alumil Aluminium vs. Highlight Communications AG | Alumil Aluminium vs. Spirent Communications plc | Alumil Aluminium vs. Consolidated Communications Holdings |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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