Correlation Between FC Investment and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both FC Investment 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 FC Investment and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FC Investment Trust and Spirent Communications plc, you can compare the effects of market volatilities on FC Investment 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 FC Investment with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of FC Investment and Spirent Communications.
Diversification Opportunities for FC Investment and Spirent Communications
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FCIT and Spirent is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and FC Investment 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 FC Investment Trust 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 FC Investment i.e., FC Investment and Spirent Communications go up and down completely randomly.
Pair Corralation between FC Investment and Spirent Communications
Assuming the 90 days trading horizon FC Investment Trust is expected to generate 0.8 times more return on investment than Spirent Communications. However, FC Investment Trust is 1.26 times less risky than Spirent Communications. It trades about 0.21 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.07 per unit of risk. If you would invest 102,396 in FC Investment Trust on September 26, 2024 and sell it today you would earn a total of 9,404 from holding FC Investment Trust or generate 9.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
FC Investment Trust vs. Spirent Communications plc
Performance |
Timeline |
FC Investment Trust |
Spirent Communications |
FC Investment and Spirent Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with FC Investment and Spirent Communications
The main advantage of trading using opposite FC Investment and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FC Investment 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.FC Investment vs. Samsung Electronics Co | FC Investment vs. Samsung Electronics Co | FC Investment vs. Hyundai Motor | FC Investment vs. Toyota Motor Corp |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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