Correlation Between Spirent Communications and Japan Post

Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Japan Post 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 Japan Post 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 Japan Post Insurance, you can compare the effects of market volatilities on Spirent Communications and Japan Post 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 Japan Post. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Japan Post.

Diversification Opportunities for Spirent Communications and Japan Post

0.44

Correlation Coefficient

Spirent Communications  Japan Post

Very weak diversification

The 3 months correlation between Spirent and Japan is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Japan Post Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Post Insurance 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 Japan Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Post Insurance has no effect on the direction of Spirent Communications i.e., Spirent Communications and Japan Post go up and down completely randomly.

Pair Corralation between Spirent Communications and Japan Post

Assuming the 90 days horizon Spirent Communications is expected to generate 2.03 times less return on investment than Japan Post. In addition to that, Spirent Communications is 1.78 times more volatile than Japan Post Insurance. It trades about 0.03 of its total potential returns per unit of risk. Japan Post Insurance is currently generating about 0.11 per unit of volatility. If you would invest  1,711  in Japan Post Insurance on December 30, 2024 and sell it today you would earn a total of  159.00  from holding Japan Post Insurance or generate 9.29% 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.  Japan Post Insurance

Spirent Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Spirent Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Japan Post Insurance

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Japan Post may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Spirent Communications and Japan Post

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

The idea behind Spirent Communications plc and Japan Post Insurance 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.