Correlation Between Spirent Communications and XLMedia PLC

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

Diversification Opportunities for Spirent Communications and XLMedia PLC

0.25

Correlation Coefficient

Spirent Communications  XLMedia PLC

Modest diversification

The 3 months correlation between Spirent and XLMedia is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and XLMedia PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XLMedia PLC 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 XLMedia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XLMedia PLC has no effect on the direction of Spirent Communications i.e., Spirent Communications and XLMedia PLC go up and down completely randomly.

Pair Corralation between Spirent Communications and XLMedia PLC

Assuming the 90 days horizon Spirent Communications plc is expected to generate 0.13 times more return on investment than XLMedia PLC. However, Spirent Communications plc is 7.98 times less risky than XLMedia PLC. It trades about 0.17 of its potential returns per unit of risk. XLMedia PLC is currently generating about 0.0 per unit of risk. If you would invest  206.00  in Spirent Communications plc on September 21, 2024 and sell it today you would earn a total of  8.00  from holding Spirent Communications plc or generate 3.88% 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.  XLMedia PLC

Spirent Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 7 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

XLMedia PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in XLMedia PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, XLMedia PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spirent Communications and XLMedia PLC

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

The idea behind Spirent Communications plc and XLMedia 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.