Correlation Between One Media and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both One Media 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 One Media and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between One Media iP and Spirent Communications plc, you can compare the effects of market volatilities on One Media 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 One Media with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of One Media and Spirent Communications.
Diversification Opportunities for One Media and Spirent Communications
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between One and Spirent is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding One Media iP and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and One Media 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 One Media iP 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 One Media i.e., One Media and Spirent Communications go up and down completely randomly.
Pair Corralation between One Media and Spirent Communications
Assuming the 90 days trading horizon One Media iP is expected to under-perform the Spirent Communications. But the stock apears to be less risky and, when comparing its historical volatility, One Media iP is 1.37 times less risky than Spirent Communications. The stock trades about -0.03 of its potential returns per unit of risk. The Spirent Communications plc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 25,888 in Spirent Communications plc on August 25, 2024 and sell it today you would lose (8,788) from holding Spirent Communications plc or give up 33.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
One Media iP vs. Spirent Communications plc
Performance |
| Timeline |
| One Media iP |
| Spirent Communications |
One Media and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with One Media and Spirent Communications
The main advantage of trading using opposite One Media and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if One Media 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.| One Media vs. InterContinental Hotels Group | One Media vs. Metals Exploration Plc | One Media vs. Coeur Mining | One Media vs. Bisichi 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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