Correlation Between Jacquet Metal and Spirent Communications

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

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

Diversification Opportunities for Jacquet Metal and Spirent Communications

0.54

Correlation Coefficient

Jacquet Metal  Spirent Communications

Very weak diversification

The 3 months correlation between Jacquet and Spirent is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Jacquet Metal Service and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Jacquet Metal 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 Jacquet Metal Service 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 Jacquet Metal i.e., Jacquet Metal and Spirent Communications go up and down completely randomly.

Pair Corralation between Jacquet Metal and Spirent Communications

Assuming the 90 days horizon Jacquet Metal Service is expected to under-perform the Spirent Communications. But the stock apears to be less risky and, when comparing its historical volatility, Jacquet Metal Service is 2.85 times less risky than Spirent Communications. The stock trades about -0.02 of its potential returns per unit of risk. The Spirent Communications plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  140.00  in Spirent Communications plc on September 27, 2024 and sell it today you would earn a total of  72.00  from holding Spirent Communications plc or generate 51.43% return on investment over 90 days.

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

Jacquet Metal Service  vs.  Spirent Communications plc

Jacquet Metal Service

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jacquet Metal Service are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Jacquet Metal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Spirent Communications

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Spirent Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Jacquet Metal and Spirent Communications

The main advantage of trading using opposite Jacquet Metal and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacquet Metal 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 Jacquet Metal Service 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.