Correlation Between SERI INDUSTRIAL and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both SERI INDUSTRIAL 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 SERI INDUSTRIAL and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SERI INDUSTRIAL EO and Spirent Communications plc, you can compare the effects of market volatilities on SERI INDUSTRIAL 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 SERI INDUSTRIAL with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of SERI INDUSTRIAL and Spirent Communications.
Diversification Opportunities for SERI INDUSTRIAL and Spirent Communications
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between SERI and Spirent is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SERI INDUSTRIAL EO and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and SERI INDUSTRIAL 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 SERI INDUSTRIAL EO 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 SERI INDUSTRIAL i.e., SERI INDUSTRIAL and Spirent Communications go up and down completely randomly.
Pair Corralation between SERI INDUSTRIAL and Spirent Communications
Assuming the 90 days trading horizon SERI INDUSTRIAL EO is expected to generate 5.75 times more return on investment than Spirent Communications. However, SERI INDUSTRIAL is 5.75 times more volatile than Spirent Communications plc. It trades about 0.03 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.15 per unit of risk. If you would invest 283.00 in SERI INDUSTRIAL EO on September 4, 2024 and sell it today you would earn a total of 3.00 from holding SERI INDUSTRIAL EO or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
SERI INDUSTRIAL EO vs. Spirent Communications plc
Performance |
| Timeline |
| SERI INDUSTRIAL EO |
| Spirent Communications |
SERI INDUSTRIAL and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SERI INDUSTRIAL and Spirent Communications
The main advantage of trading using opposite SERI INDUSTRIAL and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SERI INDUSTRIAL 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.| SERI INDUSTRIAL vs. Apple Inc | SERI INDUSTRIAL vs. Apple Inc | SERI INDUSTRIAL vs. Apple Inc | SERI INDUSTRIAL vs. Apple Inc |
| Spirent Communications vs. BJs Restaurants | Spirent Communications vs. STMicroelectronics NV | Spirent Communications vs. Renesas Electronics | Spirent Communications vs. BYD ELECTRONIC |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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