Correlation Between Spirent Communications and SLR Investment
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and SLR Investment 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 SLR Investment 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 SLR Investment Corp, you can compare the effects of market volatilities on Spirent Communications and SLR Investment 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 SLR Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and SLR Investment.
Diversification Opportunities for Spirent Communications and SLR Investment
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Spirent and SLR is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and SLR Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLR Investment Corp 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 SLR Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLR Investment Corp has no effect on the direction of Spirent Communications i.e., Spirent Communications and SLR Investment go up and down completely randomly.
Pair Corralation between Spirent Communications and SLR Investment
Assuming the 90 days horizon Spirent Communications plc is expected to generate 4.59 times more return on investment than SLR Investment. However, Spirent Communications is 4.59 times more volatile than SLR Investment Corp. It trades about 0.03 of its potential returns per unit of risk. SLR Investment Corp is currently generating about 0.08 per unit of risk. If you would invest 184.00 in Spirent Communications plc on August 29, 2024 and sell it today you would earn a total of 22.00 from holding Spirent Communications plc or generate 11.96% 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. SLR Investment Corp
Performance |
| Timeline |
| Spirent Communications |
| SLR Investment Corp |
Spirent Communications and SLR Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and SLR Investment
The main advantage of trading using opposite Spirent Communications and SLR Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, SLR Investment 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 SLR Investment will offset losses from the drop in SLR Investment's long position.| Spirent Communications vs. Verizon Communications | Spirent Communications vs. ATT Inc | Spirent Communications vs. ATT Inc | Spirent Communications vs. Deutsche Telekom AG |
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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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