Correlation Between Spirent Communications and Molson Coors

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

Diversification Opportunities for Spirent Communications and Molson Coors

0.41

Correlation Coefficient

Spirent Communications  Molson Coors

Very weak diversification

The 3 months correlation between Spirent and Molson is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Spirent Communications i.e., Spirent Communications and Molson Coors go up and down completely randomly.

Pair Corralation between Spirent Communications and Molson Coors

Assuming the 90 days horizon Spirent Communications is expected to generate 1.03 times less return on investment than Molson Coors. In addition to that, Spirent Communications is 1.07 times more volatile than Molson Coors Beverage. It trades about 0.03 of its total potential returns per unit of risk. Molson Coors Beverage is currently generating about 0.03 per unit of volatility. If you would invest  5,451  in Molson Coors Beverage on December 30, 2024 and sell it today you would earn a total of  179.00  from holding Molson Coors Beverage or generate 3.28% return on investment over 90 days.

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

Spirent Communications plc  vs.  Molson Coors Beverage

Spirent Communications

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 2 (%) 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Molson Coors Beverage

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Molson Coors 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 Molson Coors

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

The idea behind Spirent Communications plc and Molson Coors Beverage 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.