Correlation Between Spirent Communications and China Communications
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and China 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 Spirent Communications and China Communications 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 China Communications Services, you can compare the effects of market volatilities on Spirent Communications and China 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 Spirent Communications with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and China Communications.
Diversification Opportunities for Spirent Communications and China Communications
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Spirent and China is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Spirent Communications i.e., Spirent Communications and China Communications go up and down completely randomly.
Pair Corralation between Spirent Communications and China Communications
Assuming the 90 days horizon Spirent Communications is expected to generate 608.38 times less return on investment than China Communications. But when comparing it to its historical volatility, Spirent Communications plc is 1.5 times less risky than China Communications. It trades about 0.0 of its potential returns per unit of risk. China Communications Services is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8.55 in China Communications Services on August 26, 2024 and sell it today you would earn a total of 40.45 from holding China Communications Services or generate 473.1% 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. China Communications Services
Performance |
| Timeline |
| Spirent Communications |
| China Communications |
Spirent Communications and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and China Communications
The main advantage of trading using opposite Spirent Communications and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, China 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 China Communications will offset losses from the drop in China Communications' long position.| Spirent Communications vs. T Mobile | Spirent Communications vs. ATT Inc | Spirent Communications vs. Deutsche Telekom AG | Spirent Communications vs. Nippon Telegraph and |
| China Communications vs. T Mobile | China Communications vs. ATT Inc | China Communications vs. Deutsche Telekom AG | China Communications vs. Nippon Telegraph and |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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