Correlation Between Spirent Communications and Chrysalis Investments
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Chrysalis Investments 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 Chrysalis Investments 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 Chrysalis Investments, you can compare the effects of market volatilities on Spirent Communications and Chrysalis Investments 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 Chrysalis Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Chrysalis Investments.
Diversification Opportunities for Spirent Communications and Chrysalis Investments
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Spirent and Chrysalis is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Chrysalis Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chrysalis Investments 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 Chrysalis Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chrysalis Investments has no effect on the direction of Spirent Communications i.e., Spirent Communications and Chrysalis Investments go up and down completely randomly.
Pair Corralation between Spirent Communications and Chrysalis Investments
Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.52 times more return on investment than Chrysalis Investments. However, Spirent Communications plc is 1.94 times less risky than Chrysalis Investments. It trades about 0.13 of its potential returns per unit of risk. Chrysalis Investments is currently generating about -0.09 per unit of risk. If you would invest 17,700 in Spirent Communications plc on November 2, 2024 and sell it today you would earn a total of 450.00 from holding Spirent Communications plc or generate 2.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. Chrysalis Investments
Performance |
| Timeline |
| Spirent Communications |
| Chrysalis Investments |
Spirent Communications and Chrysalis Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Chrysalis Investments
The main advantage of trading using opposite Spirent Communications and Chrysalis Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Chrysalis Investments 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 Chrysalis Investments will offset losses from the drop in Chrysalis Investments' long position.The idea behind Spirent Communications plc and Chrysalis Investments 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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