Correlation Between Axis Bank and Spirent Communications

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Can any of the company-specific risk be diversified away by investing in both Axis Bank 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 Axis Bank and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Axis Bank Ltd and Spirent Communications plc, you can compare the effects of market volatilities on Axis Bank 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 Axis Bank with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axis Bank and Spirent Communications.

Diversification Opportunities for Axis Bank and Spirent Communications

AxisSpirentDiversified AwayAxisSpirentDiversified Away100%
-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Axis and Spirent is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Axis Bank Ltd and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Axis Bank 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 Axis Bank Ltd 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 Axis Bank i.e., Axis Bank and Spirent Communications go up and down completely randomly.

Pair Corralation between Axis Bank and Spirent Communications

Assuming the 90 days trading horizon Axis Bank Ltd is expected to under-perform the Spirent Communications. In addition to that, Axis Bank is 1.6 times more volatile than Spirent Communications plc. It trades about -0.2 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 Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Axis Bank Ltd  vs.  Spirent Communications plc

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-505
JavaScript chart by amCharts 3.21.15AXB SPT
       Timeline  
Axis Bank 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Axis Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec62646668707274
Spirent Communications 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec166168170172174176178180182

Axis Bank and Spirent Communications Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.44-1.89-1.34-0.79-0.240.270.821.371.922.47 0.10.20.30.40.5
JavaScript chart by amCharts 3.21.15AXB SPT
       Returns  

Pair Trading with Axis Bank and Spirent Communications

The main advantage of trading using opposite Axis Bank and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axis Bank 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 Axis Bank Ltd 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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