Correlation Between International Consolidated and Spire Healthcare

Can any of the company-specific risk be diversified away by investing in both International Consolidated and Spire Healthcare 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 International Consolidated and Spire Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between International Consolidated Airlines and Spire Healthcare Group, you can compare the effects of market volatilities on International Consolidated and Spire Healthcare 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 International Consolidated with a short position of Spire Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and Spire Healthcare.

Diversification Opportunities for International Consolidated and Spire Healthcare

-0.75

Correlation Coefficient

International Consolidated  Spire Healthcare

Pay attention - limited upside

The 3 months correlation between International and Spire is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Spire Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Healthcare and International Consolidated 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 International Consolidated Airlines are associated (or correlated) with Spire Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Healthcare has no effect on the direction of International Consolidated i.e., International Consolidated and Spire Healthcare go up and down completely randomly.

Pair Corralation between International Consolidated and Spire Healthcare

Assuming the 90 days trading horizon International Consolidated Airlines is expected to generate 1.35 times more return on investment than Spire Healthcare. However, International Consolidated is 1.35 times more volatile than Spire Healthcare Group. It trades about 0.33 of its potential returns per unit of risk. Spire Healthcare Group is currently generating about -0.13 per unit of risk. If you would invest  17,926  in International Consolidated Airlines on September 2, 2024 and sell it today you would earn a total of  8,154  from holding International Consolidated Airlines or generate 45.49% return on investment over 90 days.

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

International Consolidated Air  vs.  Spire Healthcare Group

International Consolidated

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Spire Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spire Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with International Consolidated and Spire Healthcare

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

The idea behind International Consolidated Airlines and Spire Healthcare Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.