Correlation Between Spire Global and Lynas Rare

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

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

Diversification Opportunities for Spire Global and Lynas Rare

-0.23

Correlation Coefficient

Spire Global  Lynas Rare

Very good diversification

The 3 months correlation between Spire and Lynas is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and Lynas Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lynas Rare Earths 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 Lynas Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lynas Rare Earths has no effect on the direction of Spire Global i.e., Spire Global and Lynas Rare go up and down completely randomly.

Pair Corralation between Spire Global and Lynas Rare

Given the investment horizon of 90 days Spire Global is expected to generate 2.49 times more return on investment than Lynas Rare. However, Spire Global is 2.49 times more volatile than Lynas Rare Earths. It trades about 0.05 of its potential returns per unit of risk. Lynas Rare Earths is currently generating about 0.0 per unit of risk. If you would invest  632.00  in Spire Global on December 2, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Spire Global  vs.  Lynas Rare Earths

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.

Lynas Rare Earths

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lynas Rare Earths has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Spire Global and Lynas Rare

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

The idea behind Spire Global and Lynas Rare Earths 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.