Correlation Between Spirent Communications and EJF Investments
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and EJF 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 EJF 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 EJF Investments, you can compare the effects of market volatilities on Spirent Communications and EJF 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 EJF Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and EJF Investments.
Diversification Opportunities for Spirent Communications and EJF Investments
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Spirent and EJF is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and EJF Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EJF 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 EJF Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EJF Investments has no effect on the direction of Spirent Communications i.e., Spirent Communications and EJF Investments go up and down completely randomly.
Pair Corralation between Spirent Communications and EJF Investments
Assuming the 90 days trading horizon Spirent Communications is expected to generate 1.67 times less return on investment than EJF Investments. But when comparing it to its historical volatility, Spirent Communications plc is 1.48 times less risky than EJF Investments. It trades about 0.15 of its potential returns per unit of risk. EJF Investments is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 11,400 in EJF Investments on October 30, 2024 and sell it today you would earn a total of 1,100 from holding EJF Investments or generate 9.65% 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. EJF Investments
Performance |
| Timeline |
| Spirent Communications |
| EJF Investments |
Spirent Communications and EJF Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and EJF Investments
The main advantage of trading using opposite Spirent Communications and EJF Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, EJF 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 EJF Investments will offset losses from the drop in EJF Investments' long position.| Spirent Communications vs. XLMedia PLC | Spirent Communications vs. Zoom Video Communications | Spirent Communications vs. Intermediate Capital Group | Spirent Communications vs. G5 Entertainment AB |
| EJF Investments vs. SupplyMe Capital PLC | EJF Investments vs. Premier African Minerals | EJF Investments vs. SANTANDER UK 8 | EJF Investments vs. Tower Resources 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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