Correlation Between Spirent Communications and VITA 34
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and VITA 34 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 VITA 34 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 VITA 34 AG, you can compare the effects of market volatilities on Spirent Communications and VITA 34 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 VITA 34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and VITA 34.
Diversification Opportunities for Spirent Communications and VITA 34
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Spirent and VITA is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and VITA 34 AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VITA 34 AG 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 VITA 34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VITA 34 AG has no effect on the direction of Spirent Communications i.e., Spirent Communications and VITA 34 go up and down completely randomly.
Pair Corralation between Spirent Communications and VITA 34
Assuming the 90 days horizon Spirent Communications plc is expected to generate 0.72 times more return on investment than VITA 34. However, Spirent Communications plc is 1.39 times less risky than VITA 34. It trades about -0.02 of its potential returns per unit of risk. VITA 34 AG is currently generating about -0.08 per unit of risk. If you would invest 214.00 in Spirent Communications plc on September 5, 2024 and sell it today you would lose (8.00) from holding Spirent Communications plc or give up 3.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.09% |
| Values | Daily Returns |
Spirent Communications plc vs. VITA 34 AG
Performance |
| Timeline |
| Spirent Communications |
| VITA 34 AG |
Spirent Communications and VITA 34 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and VITA 34
The main advantage of trading using opposite Spirent Communications and VITA 34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, VITA 34 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 VITA 34 will offset losses from the drop in VITA 34's long position.The idea behind Spirent Communications plc and VITA 34 AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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