Correlation Between Spirent Communications and Gaztransport
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Gaztransport 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 Gaztransport 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 Gaztransport et Technigaz, you can compare the effects of market volatilities on Spirent Communications and Gaztransport 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 Gaztransport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Gaztransport.
Diversification Opportunities for Spirent Communications and Gaztransport
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Spirent and Gaztransport is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Gaztransport et Technigaz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport et Technigaz 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 Gaztransport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport et Technigaz has no effect on the direction of Spirent Communications i.e., Spirent Communications and Gaztransport go up and down completely randomly.
Pair Corralation between Spirent Communications and Gaztransport
Assuming the 90 days trading horizon Spirent Communications plc is expected to under-perform the Gaztransport. In addition to that, Spirent Communications is 2.22 times more volatile than Gaztransport et Technigaz. It trades about -0.01 of its total potential returns per unit of risk. Gaztransport et Technigaz is currently generating about 0.05 per unit of volatility. If you would invest 9,487 in Gaztransport et Technigaz on August 30, 2024 and sell it today you would earn a total of 4,378 from holding Gaztransport et Technigaz or generate 46.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. Gaztransport et Technigaz
Performance |
| Timeline |
| Spirent Communications |
| Gaztransport et Technigaz |
Spirent Communications and Gaztransport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Gaztransport
The main advantage of trading using opposite Spirent Communications and Gaztransport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Gaztransport 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 Gaztransport will offset losses from the drop in Gaztransport's long position.The idea behind Spirent Communications plc and Gaztransport et Technigaz 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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