Correlation Between Spire Global and Materials Portfolio

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

By analyzing existing cross correlation between Spire Global and Materials Portfolio Fidelity, you can compare the effects of market volatilities on Spire Global and Materials Portfolio 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 Spire Global with a short position of Materials Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire Global and Materials Portfolio.

Diversification Opportunities for Spire Global and Materials Portfolio

0.36

Correlation Coefficient

Spire Global  Materials Portfolio

Weak diversification

The 3 months correlation between Spire and Materials is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio and Spire Global 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 Spire Global are associated (or correlated) with Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Spire Global i.e., Spire Global and Materials Portfolio go up and down completely randomly.

Pair Corralation between Spire Global and Materials Portfolio

Given the investment horizon of 90 days Spire Global is expected to generate 4.95 times more return on investment than Materials Portfolio. However, Spire Global is 4.95 times more volatile than Materials Portfolio Fidelity. It trades about 0.25 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about 0.11 per unit of risk. If you would invest  787.00  in Spire Global on September 8, 2024 and sell it today you would earn a total of  689.00  from holding Spire Global or generate 87.55% return on investment over 90 days.

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

Spire Global  vs.  Materials Portfolio Fidelity

Spire Global

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Global are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, Spire Global reported solid returns over the last few months and may actually be approaching a breakup point.

Materials Portfolio

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Portfolio Fidelity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Materials Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spire Global and Materials Portfolio

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

The idea behind Spire Global and Materials Portfolio Fidelity 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.