Correlation Between Catalyst Media and Spirent Communications

Can any of the company-specific risk be diversified away by investing in both Catalyst Media and Spirent Communications 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 Catalyst Media and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Catalyst Media Group and Spirent Communications plc, you can compare the effects of market volatilities on Catalyst Media and Spirent Communications 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 Catalyst Media with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catalyst Media and Spirent Communications.

Diversification Opportunities for Catalyst Media and Spirent Communications

-0.68

Correlation Coefficient

Catalyst Media  Spirent Communications

Excellent diversification

The 3 months correlation between Catalyst and Spirent is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Media Group and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Catalyst Media 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 Catalyst Media Group are associated (or correlated) with Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Catalyst Media i.e., Catalyst Media and Spirent Communications go up and down completely randomly.

Pair Corralation between Catalyst Media and Spirent Communications

Assuming the 90 days trading horizon Catalyst Media Group is expected to under-perform the Spirent Communications. But the stock apears to be less risky and, when comparing its historical volatility, Catalyst Media Group is 2.09 times less risky than Spirent Communications. The stock trades about -0.05 of its potential returns per unit of risk. The Spirent Communications plc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  21,624  in Spirent Communications plc on October 12, 2024 and sell it today you would lose (4,114) from holding Spirent Communications plc or give up 19.03% of portfolio value over 90 days.

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

Catalyst Media Group  vs.  Spirent Communications plc

Catalyst Media Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catalyst Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Spirent Communications

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Spirent Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Spirent Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Catalyst Media and Spirent Communications

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

The idea behind Catalyst Media Group and Spirent Communications plc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.