Correlation Between Spirit Telecom and Pro Medicus

Can any of the company-specific risk be diversified away by investing in both Spirit Telecom and Pro Medicus 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 Spirit Telecom and Pro Medicus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Spirit Telecom and Pro Medicus, you can compare the effects of market volatilities on Spirit Telecom and Pro Medicus 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 Spirit Telecom with a short position of Pro Medicus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirit Telecom and Pro Medicus.

Diversification Opportunities for Spirit Telecom and Pro Medicus

0.72

Correlation Coefficient

Spirit Telecom  Pro Medicus

Poor diversification

The 3 months correlation between Spirit and Pro is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Spirit Telecom and Pro Medicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Medicus and Spirit Telecom 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 Spirit Telecom are associated (or correlated) with Pro Medicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Medicus has no effect on the direction of Spirit Telecom i.e., Spirit Telecom and Pro Medicus go up and down completely randomly.

Pair Corralation between Spirit Telecom and Pro Medicus

Assuming the 90 days trading horizon Spirit Telecom is expected to generate 2.03 times less return on investment than Pro Medicus. In addition to that, Spirit Telecom is 2.02 times more volatile than Pro Medicus. It trades about 0.05 of its total potential returns per unit of risk. Pro Medicus is currently generating about 0.19 per unit of volatility. If you would invest  7,585  in Pro Medicus on September 24, 2024 and sell it today you would earn a total of  17,280  from holding Pro Medicus or generate 227.82% return on investment over 90 days.

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

Spirit Telecom  vs.  Pro Medicus

Spirit Telecom

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spirit Telecom are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Spirit Telecom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pro Medicus

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pro Medicus are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Pro Medicus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spirit Telecom and Pro Medicus

The main advantage of trading using opposite Spirit Telecom and Pro Medicus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirit Telecom position performs unexpectedly, Pro Medicus 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 Pro Medicus will offset losses from the drop in Pro Medicus' long position.

The idea behind Spirit Telecom and Pro Medicus 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.