Correlation Between Spirent Communications and Old Mutual
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Old Mutual 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 Old Mutual 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 Old Mutual, you can compare the effects of market volatilities on Spirent Communications and Old Mutual 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 Old Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Old Mutual.
Diversification Opportunities for Spirent Communications and Old Mutual
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Spirent and Old is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Old Mutual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Mutual 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 Old Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Mutual has no effect on the direction of Spirent Communications i.e., Spirent Communications and Old Mutual go up and down completely randomly.
Pair Corralation between Spirent Communications and Old Mutual
Assuming the 90 days trading horizon Spirent Communications is expected to generate 1.27 times less return on investment than Old Mutual. But when comparing it to its historical volatility, Spirent Communications plc is 1.2 times less risky than Old Mutual. It trades about 0.22 of its potential returns per unit of risk. Old Mutual is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 5,410 in Old Mutual on September 14, 2024 and sell it today you would earn a total of 380.00 from holding Old Mutual or generate 7.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Spirent Communications plc vs. Old Mutual
Performance |
| Timeline |
| Spirent Communications |
| Old Mutual |
Spirent Communications and Old Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Old Mutual
The main advantage of trading using opposite Spirent Communications and Old Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Old Mutual 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 Old Mutual will offset losses from the drop in Old Mutual's long position.| Spirent Communications vs. National Atomic Co | Spirent Communications vs. Flutter Entertainment PLC | Spirent Communications vs. Camellia Plc | Spirent Communications vs. Marwyn Value Investors |
| Old Mutual vs. Samsung Electronics Co | Old Mutual vs. Samsung Electronics Co | Old Mutual vs. Toyota Motor Corp | Old Mutual vs. Reliance Industries Ltd |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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