Correlation Between Markel Corp and Spirent Communications

Can any of the company-specific risk be diversified away by investing in both Markel Corp and Spirent Communications 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 Markel Corp and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Markel Corp and Spirent Communications plc, you can compare the effects of market volatilities on Markel Corp and Spirent Communications 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 Markel Corp with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Markel Corp and Spirent Communications.

Diversification Opportunities for Markel Corp and Spirent Communications

0.45

Correlation Coefficient

Markel Corp  Spirent Communications

Very weak diversification

The 3 months correlation between Markel and Spirent is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Markel Corp and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Markel Corp 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 Markel Corp are associated (or correlated) with Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Markel Corp i.e., Markel Corp and Spirent Communications go up and down completely randomly.

Pair Corralation between Markel Corp and Spirent Communications

Assuming the 90 days trading horizon Markel Corp is expected to generate 1.55 times more return on investment than Spirent Communications. However, Markel Corp is 1.55 times more volatile than Spirent Communications plc. It trades about -0.13 of its potential returns per unit of risk. Spirent Communications plc is currently generating about -0.26 per unit of risk. If you would invest  176,113  in Markel Corp on October 9, 2024 and sell it today you would lose (4,097) from holding Markel Corp or give up 2.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Markel Corp  vs.  Spirent Communications plc

Markel Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Markel Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Markel Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Spirent Communications

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Spirent Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Spirent Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Markel Corp and Spirent Communications

The main advantage of trading using opposite Markel Corp and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Markel Corp position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.

The idea behind Markel Corp and Spirent Communications plc 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..