Correlation Between Spirent Communications and Seche Environnement
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Seche Environnement 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 Seche Environnement 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 Seche Environnement SA, you can compare the effects of market volatilities on Spirent Communications and Seche Environnement 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 Seche Environnement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Seche Environnement.
Diversification Opportunities for Spirent Communications and Seche Environnement
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Spirent and Seche is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Seche Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seche Environnement 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 Seche Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seche Environnement has no effect on the direction of Spirent Communications i.e., Spirent Communications and Seche Environnement go up and down completely randomly.
Pair Corralation between Spirent Communications and Seche Environnement
Assuming the 90 days trading horizon Spirent Communications is expected to generate 1.63 times less return on investment than Seche Environnement. But when comparing it to its historical volatility, Spirent Communications plc is 2.76 times less risky than Seche Environnement. It trades about 0.31 of its potential returns per unit of risk. Seche Environnement SA is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 8,170 in Seche Environnement SA on November 27, 2024 and sell it today you would earn a total of 460.00 from holding Seche Environnement SA or generate 5.63% 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. Seche Environnement SA
Performance |
| Timeline |
| Spirent Communications |
| Seche Environnement |
Spirent Communications and Seche Environnement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Seche Environnement
The main advantage of trading using opposite Spirent Communications and Seche Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Seche Environnement 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 Seche Environnement will offset losses from the drop in Seche Environnement's long position.The idea behind Spirent Communications plc and Seche Environnement SA 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.
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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