Correlation Between Spirent Communications and Perseus Mining

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

Diversification Opportunities for Spirent Communications and Perseus Mining

0.25

Correlation Coefficient

Spirent Communications  Perseus Mining

Modest diversification

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

Pair Corralation between Spirent Communications and Perseus Mining

Assuming the 90 days horizon Spirent Communications plc is expected to generate 0.44 times more return on investment than Perseus Mining. However, Spirent Communications plc is 2.28 times less risky than Perseus Mining. It trades about 0.26 of its potential returns per unit of risk. Perseus Mining Limited is currently generating about 0.1 per unit of risk. If you would invest  204.00  in Spirent Communications plc on September 17, 2024 and sell it today you would earn a total of  12.00  from holding Spirent Communications plc or generate 5.88% 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.  Perseus Mining Limited

Spirent Communications

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 8 (%) 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 January 2025.

Perseus Mining

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Perseus Mining Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Perseus Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Spirent Communications and Perseus Mining

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

The idea behind Spirent Communications plc and Perseus Mining Limited 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 Stocks Directory module to find actively traded stocks across global markets.