Correlation Between Spirent Communications and Central Asia

Can any of the company-specific risk be diversified away by investing in both Spirent Communications and Central Asia 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 Central Asia 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 Central Asia Metals, you can compare the effects of market volatilities on Spirent Communications and Central Asia 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 Central Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Central Asia.

Diversification Opportunities for Spirent Communications and Central Asia

0.06

Correlation Coefficient

Spirent Communications  Central Asia

Significant diversification

The 3 months correlation between Spirent and Central is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc and Central Asia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Asia Metals 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 Central Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Asia Metals has no effect on the direction of Spirent Communications i.e., Spirent Communications and Central Asia go up and down completely randomly.

Pair Corralation between Spirent Communications and Central Asia

Assuming the 90 days trading horizon Spirent Communications plc is expected to generate 0.36 times more return on investment than Central Asia. However, Spirent Communications plc is 2.81 times less risky than Central Asia. It trades about 0.32 of its potential returns per unit of risk. Central Asia Metals is currently generating about -0.08 per unit of risk. If you would invest  17,338  in Spirent Communications plc on April 20, 2025 and sell it today you would earn a total of  2,202  from holding Spirent Communications plc or generate 12.7% return on investment over 90 days.

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

Spirent Communications plc  vs.  Central Asia Metals

Spirent Communications

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spirent Communications plc are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Spirent Communications may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Central Asia Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Spirent Communications and Central Asia

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

The idea behind Spirent Communications plc and Central Asia Metals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.