Correlation Between Aberdeen Diversified and Spirent Communications

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

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

Diversification Opportunities for Aberdeen Diversified and Spirent Communications

0.18

Correlation Coefficient

Aberdeen Diversified  Spirent Communications

Average diversification

The 3 months correlation between Aberdeen and Spirent is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Diversified Income and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Aberdeen Diversified 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 Aberdeen Diversified Income 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 Aberdeen Diversified i.e., Aberdeen Diversified and Spirent Communications go up and down completely randomly.

Pair Corralation between Aberdeen Diversified and Spirent Communications

Assuming the 90 days trading horizon Aberdeen Diversified is expected to generate 2.76 times less return on investment than Spirent Communications. In addition to that, Aberdeen Diversified is 2.38 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 0.07 per unit of volatility. If you would invest  17,180  in Spirent Communications plc on September 26, 2024 and sell it today you would earn a total of  590.00  from holding Spirent Communications plc or generate 3.43% return on investment over 90 days.

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

Aberdeen Diversified Income  vs.  Spirent Communications plc

Aberdeen Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Aberdeen Diversified and Spirent Communications

The main advantage of trading using opposite Aberdeen Diversified and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen Diversified 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 Aberdeen Diversified Income 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.