Correlation Between Spirent Communications and Pan American
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Pan American 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 Pan American 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 Pan American Silver, you can compare the effects of market volatilities on Spirent Communications and Pan American 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 Pan American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Pan American.
Diversification Opportunities for Spirent Communications and Pan American
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Spirent and Pan is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Spirent Communications i.e., Spirent Communications and Pan American go up and down completely randomly.
Pair Corralation between Spirent Communications and Pan American
Assuming the 90 days trading horizon Spirent Communications is expected to generate 10.92 times less return on investment than Pan American. But when comparing it to its historical volatility, Spirent Communications plc is 1.7 times less risky than Pan American. It trades about 0.03 of its potential returns per unit of risk. Pan American Silver is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,973 in Pan American Silver on October 24, 2024 and sell it today you would earn a total of 187.00 from holding Pan American Silver or generate 6.29% 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. Pan American Silver
Performance |
| Timeline |
| Spirent Communications |
| Pan American Silver |
Spirent Communications and Pan American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Pan American
The main advantage of trading using opposite Spirent Communications and Pan American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Pan American 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 Pan American will offset losses from the drop in Pan American's long position.| Spirent Communications vs. Ebro Foods | Spirent Communications vs. Europa Metals | Spirent Communications vs. Fevertree Drinks Plc | Spirent Communications vs. Hochschild Mining plc |
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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