Correlation Between Spirent Communications and BE Semiconductor

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

Diversification Opportunities for Spirent Communications and BE Semiconductor

-0.86

Correlation Coefficient

Spirent Communications  BE Semiconductor

Pay attention - limited upside

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

Pair Corralation between Spirent Communications and BE Semiconductor

Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.32 times more return on investment than BE Semiconductor. However, Spirent Communications plc is 3.12 times less risky than BE Semiconductor. It trades about 0.11 of its potential returns per unit of risk. BE Semiconductor Industries is currently generating about -0.1 per unit of risk. If you would invest  17,900  in Spirent Communications plc on December 4, 2024 and sell it today you would earn a total of  900.00  from holding Spirent Communications plc or generate 5.03% return on investment over 90 days.

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

Spirent Communications plc  vs.  BE Semiconductor Industries

Spirent Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 8 (%) 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.

BE Semiconductor Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days BE Semiconductor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Spirent Communications and BE Semiconductor

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

The idea behind Spirent Communications plc and BE Semiconductor Industries 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.