Correlation Between Spirent Communications and APPLIED MATERIALS
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS, you can compare the effects of market volatilities on Spirent Communications and APPLIED MATERIALS 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 APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and APPLIED MATERIALS.
Diversification Opportunities for Spirent Communications and APPLIED MATERIALS
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Spirent and APPLIED is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS 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 APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of Spirent Communications i.e., Spirent Communications and APPLIED MATERIALS go up and down completely randomly.
Pair Corralation between Spirent Communications and APPLIED MATERIALS
Assuming the 90 days horizon Spirent Communications plc is expected to generate 0.4 times more return on investment than APPLIED MATERIALS. However, Spirent Communications plc is 2.49 times less risky than APPLIED MATERIALS. It trades about 0.05 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about -0.06 per unit of risk. 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 |
Spirent Communications plc vs. APPLIED MATERIALS
Performance |
| Timeline |
| Spirent Communications |
| APPLIED MATERIALS |
Spirent Communications and APPLIED MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and APPLIED MATERIALS
The main advantage of trading using opposite Spirent Communications and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, APPLIED MATERIALS 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 APPLIED MATERIALS will offset losses from the drop in APPLIED MATERIALS's long position.| Spirent Communications vs. T Mobile | Spirent Communications vs. ATT Inc | Spirent Communications vs. Deutsche Telekom AG |
| APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Microsoft |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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