Correlation Between Spirent Communications and China Southern
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and China Southern 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 China Southern 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 China Southern Airlines, you can compare the effects of market volatilities on Spirent Communications and China Southern 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 China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and China Southern.
Diversification Opportunities for Spirent Communications and China Southern
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Spirent and China is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines 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 China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of Spirent Communications i.e., Spirent Communications and China Southern go up and down completely randomly.
Pair Corralation between Spirent Communications and China Southern
Assuming the 90 days horizon Spirent Communications is expected to generate 17.88 times less return on investment than China Southern. But when comparing it to its historical volatility, Spirent Communications plc is 1.67 times less risky than China Southern. It trades about 0.05 of its potential returns per unit of risk. China Southern Airlines is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 38.00 in China Southern Airlines on August 30, 2024 and sell it today you would earn a total of 8.00 from holding China Southern Airlines or generate 21.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. China Southern Airlines
Performance |
| Timeline |
| Spirent Communications |
| China Southern Airlines |
Spirent Communications and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and China Southern
The main advantage of trading using opposite Spirent Communications and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, China Southern 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 China Southern will offset losses from the drop in China Southern's long position.| Spirent Communications vs. Verizon Communications | Spirent Communications vs. ATT Inc | Spirent Communications vs. ATT Inc | Spirent Communications vs. Deutsche Telekom AG |
| China Southern vs. Ryanair Holdings plc | China Southern vs. Superior Plus Corp | China Southern vs. NMI Holdings | China Southern vs. Origin Agritech |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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