Correlation Between Sky Metals and Spirit Telecom

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

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

Diversification Opportunities for Sky Metals and Spirit Telecom

0.21

Correlation Coefficient

Sky Metals  Spirit Telecom

Modest diversification

The 3 months correlation between Sky and Spirit is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sky Metals and Spirit Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Telecom and Sky Metals 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 Sky Metals are associated (or correlated) with Spirit Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Telecom has no effect on the direction of Sky Metals i.e., Sky Metals and Spirit Telecom go up and down completely randomly.

Pair Corralation between Sky Metals and Spirit Telecom

Assuming the 90 days trading horizon Sky Metals is expected to generate 0.9 times more return on investment than Spirit Telecom. However, Sky Metals is 1.11 times less risky than Spirit Telecom. It trades about -0.01 of its potential returns per unit of risk. Spirit Telecom is currently generating about -0.12 per unit of risk. If you would invest  5.20  in Sky Metals on December 20, 2024 and sell it today you would lose (0.20) from holding Sky Metals or give up 3.85% of portfolio value over 90 days.

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

Sky Metals  vs.  Spirit Telecom

Sky Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sky Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sky Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Spirit Telecom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spirit Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sky Metals and Spirit Telecom

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

The idea behind Sky Metals and Spirit Telecom 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.