Correlation Between Spire Global and American Century

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

By analyzing existing cross correlation between Spire Global and American Century Low, you can compare the effects of market volatilities on Spire Global and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire Global and American Century.

Diversification Opportunities for Spire Global and American Century

0.82

Correlation Coefficient

Spire Global  American Century

Very poor diversification

The 3 months correlation between Spire and American is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and American Century Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Low 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Low has no effect on the direction of Spire Global i.e., Spire Global and American Century go up and down completely randomly.

Pair Corralation between Spire Global and American Century

Given the investment horizon of 90 days Spire Global is expected to generate 7.27 times more return on investment than American Century. However, Spire Global is 7.27 times more volatile than American Century Low. It trades about 0.21 of its potential returns per unit of risk. American Century Low is currently generating about 0.15 per unit of risk. If you would invest  856.00  in Spire Global on September 12, 2024 and sell it today you would earn a total of  560.00  from holding Spire Global or generate 65.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Spire Global  vs.  American Century Low

Spire Global

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Global are ranked lower than 16 (%) 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.

American Century Low

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Century Low are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, American Century is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Spire Global and American Century

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

The idea behind Spire Global and American Century Low 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.