Correlation Between Spirent Communications and Beeks Trading

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

Diversification Opportunities for Spirent Communications and Beeks Trading

0.66

Correlation Coefficient

Spirent Communications  Beeks Trading

Poor diversification

The 3 months correlation between Spirent and Beeks is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Beeks Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beeks Trading 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 Beeks Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beeks Trading has no effect on the direction of Spirent Communications i.e., Spirent Communications and Beeks Trading go up and down completely randomly.

Pair Corralation between Spirent Communications and Beeks Trading

Assuming the 90 days trading horizon Spirent Communications plc is expected to under-perform the Beeks Trading. In addition to that, Spirent Communications is 1.27 times more volatile than Beeks Trading. It trades about -0.01 of its total potential returns per unit of risk. Beeks Trading is currently generating about 0.06 per unit of volatility. If you would invest  13,200  in Beeks Trading on September 29, 2024 and sell it today you would earn a total of  14,400  from holding Beeks Trading or generate 109.09% return on investment over 90 days.

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

Spirent Communications plc  vs.  Beeks Trading

Spirent Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 5 (%) 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.

Beeks Trading

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beeks Trading are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Beeks Trading exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spirent Communications and Beeks Trading

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

The idea behind Spirent Communications plc and Beeks Trading 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.