Correlation Between Spire Global and Kumba Iron

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

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

Diversification Opportunities for Spire Global and Kumba Iron

0.06

Correlation Coefficient

Spire Global  Kumba Iron

Significant diversification

The 3 months correlation between Spire and Kumba is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and Kumba Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kumba Iron Ore 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 Kumba Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kumba Iron Ore has no effect on the direction of Spire Global i.e., Spire Global and Kumba Iron go up and down completely randomly.

Pair Corralation between Spire Global and Kumba Iron

Given the investment horizon of 90 days Spire Global is expected to under-perform the Kumba Iron. In addition to that, Spire Global is 3.46 times more volatile than Kumba Iron Ore. It trades about -0.01 of its total potential returns per unit of risk. Kumba Iron Ore is currently generating about 0.06 per unit of volatility. If you would invest  3,457,700  in Kumba Iron Ore on December 2, 2024 and sell it today you would earn a total of  242,300  from holding Kumba Iron Ore or generate 7.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Spire Global  vs.  Kumba Iron Ore

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.

Kumba Iron Ore

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kumba Iron Ore are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Kumba Iron may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Spire Global and Kumba Iron

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

The idea behind Spire Global and Kumba Iron Ore 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.