Correlation Between Spirent Communications and Power Integrations
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Power Integrations 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 Power Integrations 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 Power Integrations, you can compare the effects of market volatilities on Spirent Communications and Power Integrations 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 Power Integrations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Power Integrations.
Diversification Opportunities for Spirent Communications and Power Integrations
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Spirent and Power is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Power Integrations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Integrations 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 Power Integrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Integrations has no effect on the direction of Spirent Communications i.e., Spirent Communications and Power Integrations go up and down completely randomly.
Pair Corralation between Spirent Communications and Power Integrations
Assuming the 90 days horizon Spirent Communications plc is expected to generate 0.98 times more return on investment than Power Integrations. However, Spirent Communications plc is 1.02 times less risky than Power Integrations. It trades about 0.06 of its potential returns per unit of risk. Power Integrations is currently generating about 0.04 per unit of risk. If you would invest 204.00 in Spirent Communications plc on October 25, 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. Power Integrations
Performance |
Timeline |
Spirent Communications |
Power Integrations |
Spirent Communications and Power Integrations Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Spirent Communications and Power Integrations
The main advantage of trading using opposite Spirent Communications and Power Integrations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, Power Integrations 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 Power Integrations will offset losses from the drop in Power Integrations' long position.Spirent Communications vs. Easy Software AG | Spirent Communications vs. SCOTT TECHNOLOGY | Spirent Communications vs. Summit Hotel Properties | Spirent Communications vs. Wyndham Hotels Resorts |
Power Integrations vs. ADRIATIC METALS LS 013355 | Power Integrations vs. Perseus Mining Limited | Power Integrations vs. Charter Communications | Power Integrations vs. Iridium Communications |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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