Correlation Between Spire Healthcare and Porvair Plc

Can any of the company-specific risk be diversified away by investing in both Spire Healthcare and Porvair Plc 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 Porvair Plc 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 Porvair plc, you can compare the effects of market volatilities on Spire Healthcare and Porvair Plc 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 Porvair Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire Healthcare and Porvair Plc.

Diversification Opportunities for Spire Healthcare and Porvair Plc

-0.58

Correlation Coefficient

Spire Healthcare  Porvair Plc

Excellent diversification

The 3 months correlation between Spire and Porvair is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Spire Healthcare Group and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair plc 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 Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of Spire Healthcare i.e., Spire Healthcare and Porvair Plc go up and down completely randomly.

Pair Corralation between Spire Healthcare and Porvair Plc

Assuming the 90 days trading horizon Spire Healthcare Group is expected to under-perform the Porvair Plc. But the stock apears to be less risky and, when comparing its historical volatility, Spire Healthcare Group is 1.38 times less risky than Porvair Plc. The stock trades about -0.14 of its potential returns per unit of risk. The Porvair plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  61,000  in Porvair plc on September 4, 2024 and sell it today you would earn a total of  5,600  from holding Porvair plc or generate 9.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Spire Healthcare Group  vs.  Porvair plc

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 latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Porvair plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Porvair Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Spire Healthcare and Porvair Plc

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

The idea behind Spire Healthcare Group and Porvair plc 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.