Correlation Between Spirent Communications and Radian

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

Diversification Opportunities for Spirent Communications and Radian

0.11

Correlation Coefficient

Spirent Communications  Radian

Average diversification

The 3 months correlation between Spirent and Radian is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Radian Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radian Group 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 Radian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radian Group has no effect on the direction of Spirent Communications i.e., Spirent Communications and Radian go up and down completely randomly.

Pair Corralation between Spirent Communications and Radian

Assuming the 90 days horizon Spirent Communications plc is expected to under-perform the Radian. But the stock apears to be less risky and, when comparing its historical volatility, Spirent Communications plc is 1.09 times less risky than Radian. The stock trades about -0.01 of its potential returns per unit of risk. The Radian Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,033  in Radian Group on October 20, 2024 and sell it today you would earn a total of  147.00  from holding Radian Group or generate 4.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.04%
Values	Daily Returns

Spirent Communications plc  vs.  Radian Group

Spirent Communications

Risk-Adjusted Performance

0 of 100

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Radian Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Spirent Communications and Radian

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

The idea behind Spirent Communications plc and Radian Group 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.