Correlation Between Spirent Communications and KAR Auction
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and KAR Auction 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 KAR Auction 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 KAR Auction Services, you can compare the effects of market volatilities on Spirent Communications and KAR Auction 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 KAR Auction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and KAR Auction.
Diversification Opportunities for Spirent Communications and KAR Auction
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Spirent and KAR is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and KAR Auction Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAR Auction Services 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 KAR Auction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAR Auction Services has no effect on the direction of Spirent Communications i.e., Spirent Communications and KAR Auction go up and down completely randomly.
Pair Corralation between Spirent Communications and KAR Auction
Assuming the 90 days horizon Spirent Communications plc is expected to generate 1.01 times more return on investment than KAR Auction. However, Spirent Communications is 1.01 times more volatile than KAR Auction Services. It trades about 0.21 of its potential returns per unit of risk. KAR Auction Services is currently generating about 0.21 per unit of risk. If you would invest 204.00 in Spirent Communications plc on September 19, 2024 and sell it today you would earn a total of 10.00 from holding Spirent Communications plc or generate 4.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. KAR Auction Services
Performance |
| Timeline |
| Spirent Communications |
| KAR Auction Services |
Spirent Communications and KAR Auction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and KAR Auction
The main advantage of trading using opposite Spirent Communications and KAR Auction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, KAR Auction 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 KAR Auction will offset losses from the drop in KAR Auction's long position.| Spirent Communications vs. Penn National Gaming | Spirent Communications vs. GameStop Corp | Spirent Communications vs. QINGCI GAMES INC | Spirent Communications vs. EAST SIDE GAMES |
| KAR Auction vs. Webster Financial | KAR Auction vs. National Bank Holdings | KAR Auction vs. Nissan Chemical Corp | KAR Auction vs. CHEMICAL INDUSTRIES |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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