Correlation Between CompuGroup Medical and Spirent Communications

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

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

Diversification Opportunities for CompuGroup Medical and Spirent Communications

0.81

Correlation Coefficient

CompuGroup Medical  Spirent Communications

Very poor diversification

The 3 months correlation between CompuGroup and Spirent is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding CompuGroup Medical SE and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and CompuGroup Medical 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 CompuGroup Medical SE 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 CompuGroup Medical i.e., CompuGroup Medical and Spirent Communications go up and down completely randomly.

Pair Corralation between CompuGroup Medical and Spirent Communications

Assuming the 90 days trading horizon CompuGroup Medical SE is expected to generate 5.14 times more return on investment than Spirent Communications. However, CompuGroup Medical is 5.14 times more volatile than Spirent Communications plc. It trades about 0.22 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.11 per unit of risk. If you would invest  1,357  in CompuGroup Medical SE on September 22, 2024 and sell it today you would earn a total of  817.00  from holding CompuGroup Medical SE or generate 60.21% return on investment over 90 days.

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

CompuGroup Medical SE  vs.  Spirent Communications plc

CompuGroup Medical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CompuGroup Medical SE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CompuGroup Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with CompuGroup Medical and Spirent Communications

The main advantage of trading using opposite CompuGroup Medical and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompuGroup Medical 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 CompuGroup Medical SE 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.