Correlation Between Spirent Communications and TOTAL ENERGY

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

Diversification Opportunities for Spirent Communications and TOTAL ENERGY

0.23

Correlation Coefficient

Spirent Communications  TOTAL ENERGY

Modest diversification

The 3 months correlation between Spirent and TOTAL is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and TOTAL ENERGY SERVS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOTAL ENERGY SERVS 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 TOTAL ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOTAL ENERGY SERVS has no effect on the direction of Spirent Communications i.e., Spirent Communications and TOTAL ENERGY go up and down completely randomly.

Pair Corralation between Spirent Communications and TOTAL ENERGY

Assuming the 90 days horizon Spirent Communications is expected to generate 94.47 times less return on investment than TOTAL ENERGY. But when comparing it to its historical volatility, Spirent Communications plc is 2.02 times less risky than TOTAL ENERGY. It trades about 0.0 of its potential returns per unit of risk. TOTAL ENERGY SERVS is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  603.00  in TOTAL ENERGY SERVS on September 5, 2024 and sell it today you would earn a total of  170.00  from holding TOTAL ENERGY SERVS or generate 28.19% 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.  TOTAL ENERGY SERVS

Spirent Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirent Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Spirent Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TOTAL ENERGY SERVS

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TOTAL ENERGY SERVS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TOTAL ENERGY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spirent Communications and TOTAL ENERGY

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

The idea behind Spirent Communications plc and TOTAL ENERGY SERVS 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.