Correlation Between Spirent Communications and MOL Hungarian

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

Diversification Opportunities for Spirent Communications and MOL Hungarian

0.11

Correlation Coefficient

Spirent Communications  MOL Hungarian

Average diversification

The 3 months correlation between Spirent and MOL is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and MOL Hungarian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOL Hungarian Oil 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 MOL Hungarian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOL Hungarian Oil has no effect on the direction of Spirent Communications i.e., Spirent Communications and MOL Hungarian go up and down completely randomly.

Pair Corralation between Spirent Communications and MOL Hungarian

Assuming the 90 days trading horizon Spirent Communications is expected to generate 2.96 times less return on investment than MOL Hungarian. But when comparing it to its historical volatility, Spirent Communications plc is 2.45 times less risky than MOL Hungarian. It trades about 0.01 of its potential returns per unit of risk. MOL Hungarian Oil is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  292,200  in MOL Hungarian Oil on October 22, 2024 and sell it today you would earn a total of  0.00  from holding MOL Hungarian Oil or generate 0.0% return on investment over 90 days.

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

Spirent Communications plc  vs.  MOL Hungarian Oil

Spirent Communications

Risk-Adjusted Performance

3 of 100

Weak

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.

MOL Hungarian Oil

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MOL Hungarian Oil are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MOL Hungarian 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 MOL Hungarian

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

The idea behind Spirent Communications plc and MOL Hungarian Oil 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.