Correlation Between Spirent Communications and DETALION GAMES

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

Diversification Opportunities for Spirent Communications and DETALION GAMES

-0.61

Correlation Coefficient

Spirent Communications  DETALION GAMES

Excellent diversification

The 3 months correlation between Spirent and DETALION is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and DETALION GAMES SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DETALION GAMES SA 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 DETALION GAMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DETALION GAMES SA has no effect on the direction of Spirent Communications i.e., Spirent Communications and DETALION GAMES go up and down completely randomly.

Pair Corralation between Spirent Communications and DETALION GAMES

Assuming the 90 days horizon Spirent Communications is expected to generate 41.95 times less return on investment than DETALION GAMES. But when comparing it to its historical volatility, Spirent Communications plc is 1.76 times less risky than DETALION GAMES. It trades about 0.01 of its potential returns per unit of risk. DETALION GAMES SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  17.00  in DETALION GAMES SA on October 8, 2024 and sell it today you would earn a total of  1.00  from holding DETALION GAMES SA or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Spirent Communications plc  vs.  DETALION GAMES SA

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 fragile basic indicators, Spirent Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DETALION GAMES SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DETALION GAMES SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Spirent Communications and DETALION GAMES

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

The idea behind Spirent Communications plc and DETALION GAMES SA 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.