Correlation Between Spirent Communications and Makita
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Makita 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 Makita 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 Makita, you can compare the effects of market volatilities on Spirent Communications and Makita 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 Makita. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Makita.
Diversification Opportunities for Spirent Communications and Makita
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Spirent and Makita is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita 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 Makita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita has no effect on the direction of Spirent Communications i.e., Spirent Communications and Makita go up and down completely randomly.
Pair Corralation between Spirent Communications and Makita
Assuming the 90 days horizon Spirent Communications is expected to generate 19.8 times less return on investment than Makita. But when comparing it to its historical volatility, Spirent Communications plc is 1.32 times less risky than Makita. It trades about 0.0 of its potential returns per unit of risk. Makita is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 673.00 in Makita on September 12, 2024 and sell it today you would earn a total of 2,395 from holding Makita or generate 355.87% 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. Makita
Performance |
| Timeline |
| Spirent Communications |
| Makita |
Spirent Communications and Makita Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Makita
The main advantage of trading using opposite Spirent Communications and Makita positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Makita 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 Makita will offset losses from the drop in Makita'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 |
| Makita vs. Ribbon Communications | Makita vs. SBI Insurance Group | Makita vs. China Communications Services | Makita vs. Spirent Communications plc |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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