Correlation Between Spirent Communications and Information Services

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

Diversification Opportunities for Spirent Communications and Information Services

0.25
  Correlation Coefficient

Modest diversification

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

Pair Corralation between Spirent Communications and Information Services

Assuming the 90 days horizon Spirent Communications plc is expected to generate 0.53 times more return on investment than Information Services. However, Spirent Communications plc is 1.9 times less risky than Information Services. It trades about 0.01 of its potential returns per unit of risk. Information Services International Dentsu is currently generating about -0.03 per unit of risk. If you would invest  206.00  in Spirent Communications plc on September 6, 2024 and sell it today you would earn a total of  0.00  from holding Spirent Communications plc or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Spirent Communications plc  vs.  Information Services Internati

 Performance 
       Timeline  
Spirent Communications 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Information Services 

Risk-Adjusted Performance

0 of 100

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

Spirent Communications and Information Services Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Spirent Communications and Information Services

The main advantage of trading using opposite Spirent Communications and Information Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Information Services 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 Information Services will offset losses from the drop in Information Services' long position.
The idea behind Spirent Communications plc and Information Services International Dentsu 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.
Check out your portfolio center.
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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