Correlation Between Spire Global and Steward Small

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

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

Diversification Opportunities for Spire Global and Steward Small

0.86

Correlation Coefficient

Spire Global  Steward Small

Very poor diversification

The 3 months correlation between Spire and Steward is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and Steward Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Small Mid 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 Steward Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Small Mid has no effect on the direction of Spire Global i.e., Spire Global and Steward Small go up and down completely randomly.

Pair Corralation between Spire Global and Steward Small

Given the investment horizon of 90 days Spire Global is expected to generate 3.91 times more return on investment than Steward Small. However, Spire Global is 3.91 times more volatile than Steward Small Mid Cap. It trades about 0.21 of its potential returns per unit of risk. Steward Small Mid Cap is currently generating about 0.16 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	100.0%
Values	Daily Returns

Spire Global  vs.  Steward Small Mid Cap

Spire Global

Risk-Adjusted Performance

16 of 100

Solid

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.

Steward Small Mid

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Small Mid Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Steward Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Spire Global and Steward Small

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

The idea behind Spire Global and Steward Small Mid Cap 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.