Correlation Between Spirent Communications and HEMISPHERE EGY

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

Diversification Opportunities for Spirent Communications and HEMISPHERE EGY

0.23

Correlation Coefficient

Spirent Communications  HEMISPHERE EGY

Modest diversification

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

Pair Corralation between Spirent Communications and HEMISPHERE EGY

Assuming the 90 days horizon Spirent Communications is expected to generate 8.77 times less return on investment than HEMISPHERE EGY. In addition to that, Spirent Communications is 3.03 times more volatile than HEMISPHERE EGY. It trades about 0.0 of its total potential returns per unit of risk. HEMISPHERE EGY is currently generating about 0.09 per unit of volatility. If you would invest  69.00  in HEMISPHERE EGY on September 29, 2024 and sell it today you would earn a total of  54.00  from holding HEMISPHERE EGY or generate 78.26% 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.  HEMISPHERE EGY

Spirent Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 5 (%) 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.

HEMISPHERE EGY

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HEMISPHERE EGY are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HEMISPHERE EGY is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Spirent Communications and HEMISPHERE EGY

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

The idea behind Spirent Communications plc and HEMISPHERE EGY 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..