Correlation Between Spirent Communications and Bank of America
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Bank of America 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 Bank of America 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 Verizon Communications, you can compare the effects of market volatilities on Spirent Communications and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Bank of America.
Diversification Opportunities for Spirent Communications and Bank of America
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Spirent and Bank is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Spirent Communications i.e., Spirent Communications and Bank of America go up and down completely randomly.
Pair Corralation between Spirent Communications and Bank of America
Assuming the 90 days horizon Spirent Communications is expected to generate 3.98 times less return on investment than Bank of America. But when comparing it to its historical volatility, Spirent Communications plc is 1.17 times less risky than Bank of America. It trades about 0.1 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 3,858 in Verizon Communications on September 1, 2024 and sell it today you would earn a total of 342.00 from holding Verizon Communications or generate 8.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Spirent Communications plc vs. Verizon Communications
Performance |
| Timeline |
| Spirent Communications |
| Verizon Communications |
Spirent Communications and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Bank of America
The main advantage of trading using opposite Spirent Communications and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Spirent Communications vs. ATT Inc | Spirent Communications vs. Deutsche Telekom AG | Spirent Communications vs. Superior Plus Corp | Spirent Communications vs. NMI Holdings |
| Bank of America vs. Direct Line Insurance | Bank of America vs. Harmony Gold Mining | Bank of America vs. The Hanover Insurance | Bank of America vs. Jacquet Metal Service |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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