Correlation Between Spire Healthcare and State Street

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

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

Diversification Opportunities for Spire Healthcare and State Street

-0.88

Correlation Coefficient

Spire Healthcare  State Street

Pay attention - limited upside

The 3 months correlation between Spire and State is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Spire Healthcare Group and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Corp and Spire Healthcare 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 Healthcare Group are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Corp has no effect on the direction of Spire Healthcare i.e., Spire Healthcare and State Street go up and down completely randomly.

Pair Corralation between Spire Healthcare and State Street

Assuming the 90 days trading horizon Spire Healthcare Group is expected to under-perform the State Street. In addition to that, Spire Healthcare is 1.05 times more volatile than State Street Corp. It trades about -0.15 of its total potential returns per unit of risk. State Street Corp is currently generating about 0.19 per unit of volatility. If you would invest  8,470  in State Street Corp on September 5, 2024 and sell it today you would earn a total of  1,352  from holding State Street Corp or generate 15.96% return on investment over 90 days.

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

Spire Healthcare Group  vs.  State Street Corp

Spire Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spire Healthcare Group 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

State Street Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, State Street unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spire Healthcare and State Street

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

The idea behind Spire Healthcare Group and State Street Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.