Correlation Between SPO Networks and Federal Signal

Can any of the company-specific risk be diversified away by investing in both SPO Networks and Federal Signal 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 SPO Networks and Federal Signal into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for SPO Networks and Federal Signal

0.57

Correlation Coefficient

SPO Networks  Federal Signal

Very weak diversification

The 3 months correlation between SPO and Federal is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SPO Networks and Federal Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Signal and SPO Networks 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 SPO Networks are associated (or correlated) with Federal Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Signal has no effect on the direction of SPO Networks i.e., SPO Networks and Federal Signal go up and down completely randomly.

Pair Corralation between SPO Networks and Federal Signal

If you would invest  8,722  in Federal Signal on May 3, 2025 and sell it today you would earn a total of  3,935  from holding Federal Signal or generate 45.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

SPO Networks  vs.  Federal Signal

SPO Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPO Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, SPO Networks is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Federal Signal

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Signal are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Federal Signal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPO Networks and Federal Signal

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

The idea behind SPO Networks and Federal Signal 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.