Correlation Between Spirent Communications and Boston Scientific

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

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

Diversification Opportunities for Spirent Communications and Boston Scientific

0.44

Correlation Coefficient

Spirent Communications  Boston Scientific

Very weak diversification

The 3 months correlation between Spirent and Boston is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Boston Scientific Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific Corp and Spirent Communications 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 Spirent Communications plc are associated (or correlated) with Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific Corp has no effect on the direction of Spirent Communications i.e., Spirent Communications and Boston Scientific go up and down completely randomly.

Pair Corralation between Spirent Communications and Boston Scientific

Assuming the 90 days trading horizon Spirent Communications is expected to generate 3.47 times less return on investment than Boston Scientific. But when comparing it to its historical volatility, Spirent Communications plc is 1.4 times less risky than Boston Scientific. It trades about 0.07 of its potential returns per unit of risk. Boston Scientific Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8,666  in Boston Scientific Corp on October 23, 2024 and sell it today you would earn a total of  1,210  from holding Boston Scientific Corp or generate 13.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Spirent Communications plc  vs.  Boston Scientific Corp

Spirent Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Boston Scientific Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Boston Scientific unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spirent Communications and Boston Scientific

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

The idea behind Spirent Communications plc and Boston Scientific Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.