Correlation Between Spirent Communications and BlackRock Frontiers
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and BlackRock Frontiers 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 BlackRock Frontiers 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 BlackRock Frontiers Investment, you can compare the effects of market volatilities on Spirent Communications and BlackRock Frontiers 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 BlackRock Frontiers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and BlackRock Frontiers.
Diversification Opportunities for Spirent Communications and BlackRock Frontiers
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Spirent and BlackRock is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and BlackRock Frontiers Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Frontiers 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 BlackRock Frontiers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Frontiers has no effect on the direction of Spirent Communications i.e., Spirent Communications and BlackRock Frontiers go up and down completely randomly.
Pair Corralation between Spirent Communications and BlackRock Frontiers
Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.79 times more return on investment than BlackRock Frontiers. However, Spirent Communications plc is 1.26 times less risky than BlackRock Frontiers. It trades about 0.31 of its potential returns per unit of risk. BlackRock Frontiers Investment is currently generating about -0.08 per unit of risk. If you would invest 17,400 in Spirent Communications plc on November 6, 2024 and sell it today you would earn a total of 1,100 from holding Spirent Communications plc or generate 6.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. BlackRock Frontiers Investment
Performance |
| Timeline |
| Spirent Communications |
| BlackRock Frontiers |
Spirent Communications and BlackRock Frontiers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and BlackRock Frontiers
The main advantage of trading using opposite Spirent Communications and BlackRock Frontiers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, BlackRock Frontiers 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 BlackRock Frontiers will offset losses from the drop in BlackRock Frontiers' long position.| Spirent Communications vs. DFS Furniture PLC | Spirent Communications vs. Games Workshop Group | Spirent Communications vs. EVS Broadcast Equipment | Spirent Communications vs. Fortune Brands Home |
| BlackRock Frontiers vs. Symphony Environmental Technologies | BlackRock Frontiers vs. Europa Metals | BlackRock Frontiers vs. United Airlines Holdings | BlackRock Frontiers vs. Sovereign Metals |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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