Correlation Between Spire Global and Eureka Design

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

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

Diversification Opportunities for Spire Global and Eureka Design

-0.23

Correlation Coefficient

Spire Global  Eureka Design

Very good diversification

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

Pair Corralation between Spire Global and Eureka Design

Given the investment horizon of 90 days Spire Global is expected to under-perform the Eureka Design. In addition to that, Spire Global is 2.26 times more volatile than Eureka Design Public. It trades about -0.01 of its total potential returns per unit of risk. Eureka Design Public is currently generating about 0.2 per unit of volatility. If you would invest  65.00  in Eureka Design Public on December 2, 2024 and sell it today you would earn a total of  32.00  from holding Eureka Design Public or generate 49.23% 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.  Eureka Design Public

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.

Eureka Design Public

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eureka Design Public are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Eureka Design sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spire Global and Eureka Design

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

The idea behind Spire Global and Eureka Design Public 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.