Correlation Between Spirent Communications and Power Metal
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Power Metal 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 Power Metal 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 Power Metal Resources, you can compare the effects of market volatilities on Spirent Communications and Power Metal 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 Power Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Power Metal.
Diversification Opportunities for Spirent Communications and Power Metal
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Spirent and Power is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Power Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metal Resources 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 Power Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metal Resources has no effect on the direction of Spirent Communications i.e., Spirent Communications and Power Metal go up and down completely randomly.
Pair Corralation between Spirent Communications and Power Metal
Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.89 times more return on investment than Power Metal. However, Spirent Communications plc is 1.13 times less risky than Power Metal. It trades about 0.06 of its potential returns per unit of risk. Power Metal Resources is currently generating about 0.03 per unit of risk. If you would invest 10,760 in Spirent Communications plc on September 14, 2024 and sell it today you would earn a total of 7,170 from holding Spirent Communications plc or generate 66.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. Power Metal Resources
Performance |
| Timeline |
| Spirent Communications |
| Power Metal Resources |
Spirent Communications and Power Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Power Metal
The main advantage of trading using opposite Spirent Communications and Power Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Power Metal 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 Power Metal will offset losses from the drop in Power Metal'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 |
| Power Metal vs. Givaudan SA | Power Metal vs. Antofagasta PLC | Power Metal vs. Ferrexpo PLC | Power Metal vs. Atalaya Mining |
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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