Correlation Between Spirent Communications and CryoLife
Can any of the company-specific risk be diversified away by investing in both Spirent Communications and CryoLife 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 CryoLife 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 CryoLife, you can compare the effects of market volatilities on Spirent Communications and CryoLife 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 CryoLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and CryoLife.
Diversification Opportunities for Spirent Communications and CryoLife
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Spirent and CryoLife is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and CryoLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CryoLife 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 CryoLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CryoLife has no effect on the direction of Spirent Communications i.e., Spirent Communications and CryoLife go up and down completely randomly.
Pair Corralation between Spirent Communications and CryoLife
Assuming the 90 days horizon Spirent Communications plc is expected to generate 0.68 times more return on investment than CryoLife. However, Spirent Communications plc is 1.47 times less risky than CryoLife. It trades about 0.3 of its potential returns per unit of risk. CryoLife is currently generating about 0.02 per unit of risk. If you would invest 204.00 in Spirent Communications plc on September 23, 2024 and sell it today you would earn a total of 14.00 from holding Spirent Communications plc or generate 6.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Spirent Communications plc vs. CryoLife
Performance |
Timeline |
Spirent Communications |
CryoLife |
Spirent Communications and CryoLife Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Spirent Communications and CryoLife
The main advantage of trading using opposite Spirent Communications and CryoLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications position performs unexpectedly, CryoLife 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 CryoLife will offset losses from the drop in CryoLife's long position.Spirent Communications vs. T Mobile | Spirent Communications vs. China Mobile Limited | Spirent Communications vs. Verizon Communications | Spirent Communications vs. ATT Inc |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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