Correlation Between Keysight Technologies and Spectris Plc

Can any of the company-specific risk be diversified away by investing in both Keysight Technologies and Spectris Plc 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 Keysight Technologies and Spectris Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keysight Technologies and Spectris plc, you can compare the effects of market volatilities on Keysight Technologies and Spectris Plc 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 Keysight Technologies with a short position of Spectris Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keysight Technologies and Spectris Plc.

Diversification Opportunities for Keysight Technologies and Spectris Plc

0.58

Correlation Coefficient

Keysight Technologies  Spectris Plc

Very weak diversification

The 3 months correlation between Keysight and Spectris is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Keysight Technologies and Spectris plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectris plc and Keysight Technologies 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 Keysight Technologies are associated (or correlated) with Spectris Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectris plc has no effect on the direction of Keysight Technologies i.e., Keysight Technologies and Spectris Plc go up and down completely randomly.

Pair Corralation between Keysight Technologies and Spectris Plc

Given the investment horizon of 90 days Keysight Technologies is expected to under-perform the Spectris Plc. But the stock apears to be less risky and, when comparing its historical volatility, Keysight Technologies is 1.92 times less risky than Spectris Plc. The stock trades about -0.04 of its potential returns per unit of risk. The Spectris plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,062  in Spectris plc on December 27, 2024 and sell it today you would earn a total of  52.00  from holding Spectris plc or generate 1.7% return on investment over 90 days.

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

Keysight Technologies  vs.  Spectris plc

Keysight Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Keysight Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Keysight Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Spectris plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spectris plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, Spectris Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Keysight Technologies and Spectris Plc

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

The idea behind Keysight Technologies and Spectris 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.