Correlation Between Spirent Communications and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Freeport McMoRan 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 Freeport McMoRan 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 Freeport McMoRan, you can compare the effects of market volatilities on Spirent Communications and Freeport McMoRan 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 Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Freeport McMoRan.
Diversification Opportunities for Spirent Communications and Freeport McMoRan
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Spirent and Freeport is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 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 Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of Spirent Communications i.e., Spirent Communications and Freeport McMoRan go up and down completely randomly.
Pair Corralation between Spirent Communications and Freeport McMoRan
Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.46 times more return on investment than Freeport McMoRan. However, Spirent Communications plc is 2.16 times less risky than Freeport McMoRan. It trades about 0.3 of its potential returns per unit of risk. Freeport McMoRan is currently generating about -0.16 per unit of risk. If you would invest 17,400 in Spirent Communications plc on November 5, 2024 and sell it today you would earn a total of 1,080 from holding Spirent Communications plc or generate 6.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. Freeport McMoRan
Performance |
| Timeline |
| Spirent Communications |
| Freeport McMoRan |
Spirent Communications and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Freeport McMoRan
The main advantage of trading using opposite Spirent Communications and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Freeport McMoRan 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 Freeport McMoRan will offset losses from the drop in Freeport McMoRan's long position.| Spirent Communications vs. Fresenius Medical Care | Spirent Communications vs. Endeavour Mining Corp | Spirent Communications vs. Prosiebensat 1 Media | Spirent Communications vs. Silvercorp Metals |
| Freeport McMoRan vs. AMG Advanced Metallurgical | Freeport McMoRan vs. GreenX Metals | Freeport McMoRan vs. Synthomer plc | Freeport McMoRan vs. Cairn Homes PLC |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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