Correlation Between Spirent Communications and Trellus Health

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

Diversification Opportunities for Spirent Communications and Trellus Health

0.42

Correlation Coefficient

Spirent Communications  Trellus Health

Very weak diversification

The 3 months correlation between Spirent and Trellus is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Trellus Health plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trellus Health plc 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 Trellus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trellus Health plc has no effect on the direction of Spirent Communications i.e., Spirent Communications and Trellus Health go up and down completely randomly.

Pair Corralation between Spirent Communications and Trellus Health

Assuming the 90 days trading horizon Spirent Communications is expected to generate 95.66 times less return on investment than Trellus Health. But when comparing it to its historical volatility, Spirent Communications plc is 131.82 times less risky than Trellus Health. It trades about 0.16 of its potential returns per unit of risk. Trellus Health plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Trellus Health plc on December 25, 2024 and sell it today you would earn a total of  113.00  from holding Trellus Health plc or generate 198.25% return on investment over 90 days.

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

Spirent Communications plc  vs.  Trellus Health plc

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 12 (%) 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.

Trellus Health plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trellus Health plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Trellus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spirent Communications and Trellus Health

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

The idea behind Spirent Communications plc and Trellus Health plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.