Correlation Between Spirent Communications and London Stock
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and London Stock 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 London Stock 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 London Stock Exchange, you can compare the effects of market volatilities on Spirent Communications and London Stock 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 London Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and London Stock.
Diversification Opportunities for Spirent Communications and London Stock
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Spirent and London is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and London Stock Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Stock Exchange 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 London Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Stock Exchange has no effect on the direction of Spirent Communications i.e., Spirent Communications and London Stock go up and down completely randomly.
Pair Corralation between Spirent Communications and London Stock
Assuming the 90 days horizon Spirent Communications is expected to generate 1.03 times less return on investment than London Stock. In addition to that, Spirent Communications is 2.02 times more volatile than London Stock Exchange. It trades about 0.05 of its total potential returns per unit of risk. London Stock Exchange is currently generating about 0.1 per unit of volatility. If you would invest 13,500 in London Stock Exchange on October 24, 2024 and sell it today you would earn a total of 400.00 from holding London Stock Exchange or generate 2.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
Spirent Communications plc vs. London Stock Exchange
Performance |
| Timeline |
| Spirent Communications |
| London Stock Exchange |
Spirent Communications and London Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and London Stock
The main advantage of trading using opposite Spirent Communications and London Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, London Stock 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 London Stock will offset losses from the drop in London Stock's long position.| Spirent Communications vs. MARKET VECTR RETAIL | Spirent Communications vs. CARSALESCOM | Spirent Communications vs. CANON MARKETING JP | Spirent Communications vs. UNIVERSAL MUSIC GROUP |
| London Stock vs. Cairo Communication SpA | London Stock vs. Spirent Communications plc | London Stock vs. Zoom Video Communications | London Stock vs. Singapore Telecommunications Limited |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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