Correlation Between Spirent Communications and Vienna Insurance

Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Vienna Insurance 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 Vienna Insurance 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 Vienna Insurance Group, you can compare the effects of market volatilities on Spirent Communications and Vienna Insurance 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 Vienna Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Vienna Insurance.

Diversification Opportunities for Spirent Communications and Vienna Insurance

0.86

Correlation Coefficient

Spirent Communications  Vienna Insurance

Very poor diversification

The 3 months correlation between Spirent and Vienna is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Vienna Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vienna Insurance 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 Vienna Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vienna Insurance has no effect on the direction of Spirent Communications i.e., Spirent Communications and Vienna Insurance go up and down completely randomly.

Pair Corralation between Spirent Communications and Vienna Insurance

Assuming the 90 days trading horizon Spirent Communications is expected to generate 4.17 times less return on investment than Vienna Insurance. But when comparing it to its historical volatility, Spirent Communications plc is 1.47 times less risky than Vienna Insurance. It trades about 0.14 of its potential returns per unit of risk. Vienna Insurance Group is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  3,015  in Vienna Insurance Group on December 23, 2024 and sell it today you would earn a total of  900.00  from holding Vienna Insurance Group or generate 29.85% return on investment over 90 days.

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

Spirent Communications plc  vs.  Vienna Insurance Group

Spirent Communications

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Spirent Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vienna Insurance

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Vienna Insurance Group are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vienna Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spirent Communications and Vienna Insurance

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

The idea behind Spirent Communications plc and Vienna Insurance Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.