Correlation Between Genco Shipping and Spirent Communications

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

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

Diversification Opportunities for Genco Shipping and Spirent Communications

-0.55

Correlation Coefficient

Genco Shipping  Spirent Communications

Excellent diversification

The 3 months correlation between Genco and Spirent is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Genco Shipping Trading and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Genco Shipping 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 Genco Shipping Trading 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 Genco Shipping i.e., Genco Shipping and Spirent Communications go up and down completely randomly.

Pair Corralation between Genco Shipping and Spirent Communications

Assuming the 90 days trading horizon Genco Shipping is expected to generate 2.53 times less return on investment than Spirent Communications. But when comparing it to its historical volatility, Genco Shipping Trading is 2.08 times less risky than Spirent Communications. It trades about 0.03 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  168.00  in Spirent Communications plc on October 4, 2024 and sell it today you would earn a total of  44.00  from holding Spirent Communications plc or generate 26.19% return on investment over 90 days.

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

Genco Shipping Trading  vs.  Spirent Communications plc

Genco Shipping Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genco Shipping Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Spirent Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 7 (%) 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 February 2025.

Pair Trading with Genco Shipping and Spirent Communications

The main advantage of trading using opposite Genco Shipping and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genco Shipping 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 Genco Shipping Trading 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.