Correlation Between Spirent Communications and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics NV, you can compare the effects of market volatilities on Spirent Communications and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and STMicroelectronics.
Diversification Opportunities for Spirent Communications and STMicroelectronics
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Spirent and STMicroelectronics is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Spirent Communications i.e., Spirent Communications and STMicroelectronics go up and down completely randomly.
Pair Corralation between Spirent Communications and STMicroelectronics
Assuming the 90 days horizon Spirent Communications plc is expected to generate 1.84 times more return on investment than STMicroelectronics. However, Spirent Communications is 1.84 times more volatile than STMicroelectronics NV. It trades about 0.0 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of risk. If you would invest 304.00 in Spirent Communications plc on September 3, 2024 and sell it today you would lose (98.00) from holding Spirent Communications plc or give up 32.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. STMicroelectronics NV
Performance |
| Timeline |
| Spirent Communications |
| STMicroelectronics |
Spirent Communications and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and STMicroelectronics
The main advantage of trading using opposite Spirent Communications and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| Spirent Communications vs. Addus HomeCare | Spirent Communications vs. United Rentals | Spirent Communications vs. Hyster Yale Materials Handling | Spirent Communications vs. Corporate Office Properties |
| STMicroelectronics vs. Align Technology | STMicroelectronics vs. Micron Technology | STMicroelectronics vs. Fukuyama Transporting Co | STMicroelectronics vs. FANDIFI TECHNOLOGY P |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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