Correlation Between Spirent Communications and BHP Group
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and BHP Group 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 BHP Group 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 BHP Group Limited, you can compare the effects of market volatilities on Spirent Communications and BHP Group 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 BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and BHP Group.
Diversification Opportunities for Spirent Communications and BHP Group
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Spirent and BHP is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Spirent Communications i.e., Spirent Communications and BHP Group go up and down completely randomly.
Pair Corralation between Spirent Communications and BHP Group
Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.77 times more return on investment than BHP Group. However, Spirent Communications plc is 1.3 times less risky than BHP Group. It trades about 0.2 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.11 per unit of risk. If you would invest 16,950 in Spirent Communications plc on September 5, 2024 and sell it today you would earn a total of 850.00 from holding Spirent Communications plc or generate 5.01% 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. BHP Group Limited
Performance |
| Timeline |
| Spirent Communications |
| BHP Group Limited |
Spirent Communications and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and BHP Group
The main advantage of trading using opposite Spirent Communications and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group's long position.| Spirent Communications vs. Berkshire Hathaway | Spirent Communications vs. Hyundai Motor | Spirent Communications vs. Samsung Electronics Co | Spirent Communications vs. Samsung Electronics Co |
| BHP Group vs. Spirent Communications plc | BHP Group vs. Aeorema Communications Plc | BHP Group vs. Cairo Communication SpA | BHP Group vs. Infrastrutture Wireless Italiane |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |