Correlation Between Spirent Communications and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and SMA Solar 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 SMA Solar 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 SMA Solar Technology, you can compare the effects of market volatilities on Spirent Communications and SMA Solar 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 SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and SMA Solar.
Diversification Opportunities for Spirent Communications and SMA Solar
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Spirent and SMA is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Spirent Communications i.e., Spirent Communications and SMA Solar go up and down completely randomly.
Pair Corralation between Spirent Communications and SMA Solar
Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.18 times more return on investment than SMA Solar. However, Spirent Communications plc is 5.48 times less risky than SMA Solar. It trades about 0.0 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.21 per unit of risk. If you would invest 17,130 in Spirent Communications plc on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Spirent Communications plc or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. SMA Solar Technology
Performance |
| Timeline |
| Spirent Communications |
| SMA Solar Technology |
Spirent Communications and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and SMA Solar
The main advantage of trading using opposite Spirent Communications and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar's long position.| Spirent Communications vs. Quadrise Plc | Spirent Communications vs. ImmuPharma PLC | Spirent Communications vs. Intuitive Investments Group | Spirent Communications vs. European Metals Holdings |
| SMA Solar vs. Samsung Electronics Co | SMA Solar vs. Samsung Electronics Co | SMA Solar vs. Hyundai Motor | SMA Solar vs. Toyota Motor Corp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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