Correlation Between Spire Global and DongWon Development

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

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

Diversification Opportunities for Spire Global and DongWon Development

-0.46

Correlation Coefficient

Spire Global  DongWon Development

Very good diversification

The 3 months correlation between Spire and DongWon is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and DongWon Development CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DongWon Development CoLtd 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 DongWon Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DongWon Development CoLtd has no effect on the direction of Spire Global i.e., Spire Global and DongWon Development go up and down completely randomly.

Pair Corralation between Spire Global and DongWon Development

Given the investment horizon of 90 days Spire Global is expected to generate 5.02 times more return on investment than DongWon Development. However, Spire Global is 5.02 times more volatile than DongWon Development CoLtd. It trades about 0.05 of its potential returns per unit of risk. DongWon Development CoLtd is currently generating about -0.04 per unit of risk. If you would invest  632.00  in Spire Global on December 1, 2024 and sell it today you would earn a total of  509.00  from holding Spire Global or generate 80.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.17%
Values	Daily Returns

Spire Global  vs.  DongWon Development CoLtd

Spire Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spire Global has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Spire Global is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

DongWon Development CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DongWon Development CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DongWon Development is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spire Global and DongWon Development

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

The idea behind Spire Global and DongWon Development CoLtd 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.