Correlation Between TIMES CHINA and Spirent Communications

Can any of the company-specific risk be diversified away by investing in both TIMES CHINA and Spirent Communications 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 TIMES CHINA and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TIMES CHINA HLDGS and Spirent Communications plc, you can compare the effects of market volatilities on TIMES CHINA and Spirent Communications 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 TIMES CHINA with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of TIMES CHINA and Spirent Communications.

Diversification Opportunities for TIMES CHINA and Spirent Communications

-0.1

Correlation Coefficient

TIMES CHINA  Spirent Communications

Good diversification

The 3 months correlation between TIMES and Spirent is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding TIMES CHINA HLDGS and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and TIMES CHINA 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 TIMES CHINA HLDGS are associated (or correlated) with Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of TIMES CHINA i.e., TIMES CHINA and Spirent Communications go up and down completely randomly.

Pair Corralation between TIMES CHINA and Spirent Communications

Assuming the 90 days horizon TIMES CHINA HLDGS is expected to generate 3.79 times more return on investment than Spirent Communications. However, TIMES CHINA is 3.79 times more volatile than Spirent Communications plc. It trades about 0.05 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.01 per unit of risk. If you would invest  15.00  in TIMES CHINA HLDGS on October 21, 2024 and sell it today you would lose (12.05) from holding TIMES CHINA HLDGS or give up 80.33% of portfolio value over 90 days.

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

TIMES CHINA HLDGS  vs.  Spirent Communications plc

TIMES CHINA HLDGS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TIMES CHINA HLDGS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, TIMES CHINA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Spirent Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirent Communications plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Spirent Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TIMES CHINA and Spirent Communications

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

The idea behind TIMES CHINA HLDGS and Spirent Communications 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.