Correlation Between Spirent Communications and Panasonic Corp

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

Diversification Opportunities for Spirent Communications and Panasonic Corp

0.0

Correlation Coefficient

Spirent Communications  Panasonic Corp

Pay attention - limited upside

The 3 months correlation between Spirent and Panasonic is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Panasonic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panasonic 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 Panasonic Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panasonic Corp has no effect on the direction of Spirent Communications i.e., Spirent Communications and Panasonic Corp go up and down completely randomly.

Pair Corralation between Spirent Communications and Panasonic Corp

Assuming the 90 days trading horizon Spirent Communications is expected to generate 10.51 times less return on investment than Panasonic Corp. But when comparing it to its historical volatility, Spirent Communications plc is 2.57 times less risky than Panasonic Corp. It trades about 0.09 of its potential returns per unit of risk. Panasonic Corp is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  134,850  in Panasonic Corp on October 7, 2024 and sell it today you would earn a total of  27,050  from holding Panasonic Corp or generate 20.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	51.22%
Values	Daily Returns

Spirent Communications plc  vs.  Panasonic Corp

Spirent Communications

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 3 (%) 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.

Panasonic Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Spirent Communications and Panasonic Corp

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

The idea behind Spirent Communications plc and Panasonic 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.