Correlation Between Spirent Communications and Carsales
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Carsales 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 Carsales 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 Carsales, you can compare the effects of market volatilities on Spirent Communications and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Carsales.
Diversification Opportunities for Spirent Communications and Carsales
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Spirent and Carsales is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of Spirent Communications i.e., Spirent Communications and Carsales go up and down completely randomly.
Pair Corralation between Spirent Communications and Carsales
Assuming the 90 days horizon Spirent Communications plc is expected to under-perform the Carsales. But the stock apears to be less risky and, when comparing its historical volatility, Spirent Communications plc is 1.37 times less risky than Carsales. The stock trades about -0.03 of its potential returns per unit of risk. The Carsales is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,123 in Carsales on September 3, 2024 and sell it today you would earn a total of 417.00 from holding Carsales or generate 19.64% 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. Carsales
Performance |
| Timeline |
| Spirent Communications |
| Carsales |
Spirent Communications and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Carsales
The main advantage of trading using opposite Spirent Communications and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' 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 |
| Carsales vs. Thai Beverage Public | Carsales vs. Premier Foods PLC | Carsales vs. Food Life Companies | Carsales vs. CN MODERN DAIRY |
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 CEOs Directory module to screen CEOs from public companies around the world.
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