Correlation Between Ion Beam and Spirent Communications

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

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

Diversification Opportunities for Ion Beam and Spirent Communications

0.32

Correlation Coefficient

Ion Beam  Spirent Communications

Weak diversification

The 3 months correlation between Ion and Spirent is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ion Beam Applications and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Ion Beam 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 Ion Beam Applications 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 Ion Beam i.e., Ion Beam and Spirent Communications go up and down completely randomly.

Pair Corralation between Ion Beam and Spirent Communications

Assuming the 90 days trading horizon Ion Beam is expected to generate 3.19 times less return on investment than Spirent Communications. In addition to that, Ion Beam is 2.97 times more volatile than Spirent Communications plc. It trades about 0.01 of its total potential returns per unit of risk. Spirent Communications plc is currently generating about 0.05 per unit of volatility. If you would invest  17,290  in Spirent Communications plc on September 15, 2024 and sell it today you would earn a total of  470.00  from holding Spirent Communications plc or generate 2.72% return on investment over 90 days.

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

Ion Beam Applications  vs.  Spirent Communications plc

Ion Beam Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ion Beam Applications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ion Beam is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Spirent Communications

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 4 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ion Beam and Spirent Communications

The main advantage of trading using opposite Ion Beam and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ion Beam 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 Ion Beam Applications 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.