Correlation Between European Metals and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both European Metals and Spirent Communications 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 European Metals and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Metals Holdings and Spirent Communications plc, you can compare the effects of market volatilities on European Metals and Spirent Communications 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 European Metals with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Spirent Communications.
Diversification Opportunities for European Metals and Spirent Communications
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between European and Spirent is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and European Metals 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 European Metals Holdings are associated (or correlated) with Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of European Metals i.e., European Metals and Spirent Communications go up and down completely randomly.
Pair Corralation between European Metals and Spirent Communications
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Spirent Communications. In addition to that, European Metals is 5.26 times more volatile than Spirent Communications plc. It trades about -0.14 of its total potential returns per unit of risk. Spirent Communications plc is currently generating about -0.09 per unit of volatility. If you would invest 17,800 in Spirent Communications plc on August 25, 2024 and sell it today you would lose (700.00) from holding Spirent Communications plc or give up 3.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Metals Holdings vs. Spirent Communications plc
Performance |
| Timeline |
| European Metals Holdings |
| Spirent Communications |
European Metals and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Spirent Communications
The main advantage of trading using opposite European Metals and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.| European Metals vs. Martin Marietta Materials | European Metals vs. Caledonia Mining | European Metals vs. Blackstone Loan Financing | European Metals vs. Greenroc Mining PLC |
| Spirent Communications vs. Quadrise Plc | Spirent Communications vs. ImmuPharma PLC | Spirent Communications vs. Intuitive Investments Group | Spirent Communications vs. European Metals Holdings |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |