Correlation Between Spirent Communications and Caledonia Mining
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Caledonia Mining 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 Caledonia Mining 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 Caledonia Mining, you can compare the effects of market volatilities on Spirent Communications and Caledonia Mining 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 Caledonia Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Caledonia Mining.
Diversification Opportunities for Spirent Communications and Caledonia Mining
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Spirent and Caledonia is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining 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 Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of Spirent Communications i.e., Spirent Communications and Caledonia Mining go up and down completely randomly.
Pair Corralation between Spirent Communications and Caledonia Mining
Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 1.62 times more return on investment than Caledonia Mining. However, Spirent Communications is 1.62 times more volatile than Caledonia Mining. It trades about 0.0 of its potential returns per unit of risk. Caledonia Mining is currently generating about -0.02 per unit of risk. If you would invest 21,624 in Spirent Communications plc on October 12, 2024 and sell it today you would lose (4,114) from holding Spirent Communications plc or give up 19.03% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Spirent Communications plc vs. Caledonia Mining
Performance |
Timeline |
Spirent Communications |
Caledonia Mining |
Spirent Communications and Caledonia Mining Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Spirent Communications and Caledonia Mining
The main advantage of trading using opposite Spirent Communications and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Caledonia Mining 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 Caledonia Mining will offset losses from the drop in Caledonia Mining's long position.Spirent Communications vs. Seche Environnement SA | Spirent Communications vs. Leroy Seafood Group | Spirent Communications vs. Lindsell Train Investment | Spirent Communications vs. Broadcom |
Caledonia Mining vs. Telecom Italia SpA | Caledonia Mining vs. Waste Management | Caledonia Mining vs. Ecclesiastical Insurance Office | Caledonia Mining vs. Spirent Communications 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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