Correlation Between PENN NATL and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both PENN NATL 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 PENN NATL and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PENN NATL GAMING and Spirent Communications plc, you can compare the effects of market volatilities on PENN NATL 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 PENN NATL with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Spirent Communications.
Diversification Opportunities for PENN NATL and Spirent Communications
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PENN and Spirent is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and PENN NATL 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 PENN NATL GAMING 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 PENN NATL i.e., PENN NATL and Spirent Communications go up and down completely randomly.
Pair Corralation between PENN NATL and Spirent Communications
Assuming the 90 days trading horizon PENN NATL GAMING is expected to under-perform the Spirent Communications. In addition to that, PENN NATL is 2.35 times more volatile than Spirent Communications plc. It trades about -0.09 of its total potential returns per unit of risk. Spirent Communications plc is currently generating about 0.27 per unit of volatility. If you would invest 202.00 in Spirent Communications plc on September 12, 2024 and sell it today you would earn a total of 14.00 from holding Spirent Communications plc or generate 6.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
PENN NATL GAMING vs. Spirent Communications plc
Performance |
| Timeline |
| PENN NATL GAMING |
| Spirent Communications |
PENN NATL and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PENN NATL and Spirent Communications
The main advantage of trading using opposite PENN NATL and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN NATL 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.The idea behind PENN NATL GAMING and Spirent Communications plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Spirent Communications vs. Superior Plus Corp | Spirent Communications vs. SIVERS SEMICONDUCTORS AB | Spirent Communications vs. Norsk Hydro ASA | Spirent Communications vs. Reliance Steel Aluminum |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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