Correlation Between Spirent Communications and Vale SA
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Vale SA 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 Vale SA 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 Vale SA, you can compare the effects of market volatilities on Spirent Communications and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Vale SA.
Diversification Opportunities for Spirent Communications and Vale SA
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Spirent and Vale is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Spirent Communications i.e., Spirent Communications and Vale SA go up and down completely randomly.
Pair Corralation between Spirent Communications and Vale SA
Assuming the 90 days horizon Spirent Communications plc is expected to generate 0.45 times more return on investment than Vale SA. However, Spirent Communications plc is 2.23 times less risky than Vale SA. It trades about 0.1 of its potential returns per unit of risk. Vale SA is currently generating about 0.01 per unit of risk. If you would invest 202.00 in Spirent Communications plc on September 12, 2024 and sell it today you would earn a total of 14.00 from holding Spirent Communications plc or generate 6.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. Vale SA
Performance |
| Timeline |
| Spirent Communications |
| Vale SA |
Spirent Communications and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Vale SA
The main advantage of trading using opposite Spirent Communications and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA'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 |
| Vale SA vs. Transport International Holdings | Vale SA vs. COPLAND ROAD CAPITAL | Vale SA vs. Transportadora de Gas | Vale SA vs. Datadog |
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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