Correlation Between Spirent Communications and BH Macro

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

Diversification Opportunities for Spirent Communications and BH Macro

-0.8

Correlation Coefficient

Spirent Communications  BH Macro

Pay attention - limited upside

The 3 months correlation between Spirent and BHMU is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and BH Macro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BH Macro Limited 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 BH Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BH Macro Limited has no effect on the direction of Spirent Communications i.e., Spirent Communications and BH Macro go up and down completely randomly.

Pair Corralation between Spirent Communications and BH Macro

Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.61 times more return on investment than BH Macro. However, Spirent Communications plc is 1.63 times less risky than BH Macro. It trades about 0.14 of its potential returns per unit of risk. BH Macro Limited is currently generating about -0.09 per unit of risk. If you would invest  17,670  in Spirent Communications plc on December 22, 2024 and sell it today you would earn a total of  1,130  from holding Spirent Communications plc or generate 6.4% 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.  BH Macro Limited

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 uncertain technical and fundamental indicators, Spirent Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BH Macro Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BH Macro Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Spirent Communications and BH Macro

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

The idea behind Spirent Communications plc and BH Macro Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.