Correlation Between SPAR and Global Payments

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

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

Diversification Opportunities for SPAR and Global Payments

-0.32

Correlation Coefficient

SPAR  Global Payments

Very good diversification

The 3 months correlation between SPAR and Global is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding SPAR Group and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and SPAR 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 SPAR Group are associated (or correlated) with Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of SPAR i.e., SPAR and Global Payments go up and down completely randomly.

Pair Corralation between SPAR and Global Payments

Given the investment horizon of 90 days SPAR Group is expected to generate 2.54 times more return on investment than Global Payments. However, SPAR is 2.54 times more volatile than Global Payments. It trades about 0.04 of its potential returns per unit of risk. Global Payments is currently generating about 0.03 per unit of risk. If you would invest  131.00  in SPAR Group on September 2, 2024 and sell it today you would earn a total of  92.00  from holding SPAR Group or generate 70.23% return on investment over 90 days.

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

SPAR Group  vs.  Global Payments

SPAR Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPAR Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Global Payments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Payments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Global Payments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPAR and Global Payments

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

The idea behind SPAR Group and Global Payments 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.