Correlation Between Spire Global and Vestas Wind

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

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

Diversification Opportunities for Spire Global and Vestas Wind

0.14

Correlation Coefficient

Spire Global  Vestas Wind

Average diversification

The 3 months correlation between Spire and Vestas is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and Vestas Wind Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vestas Wind Systems 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 Vestas Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vestas Wind Systems has no effect on the direction of Spire Global i.e., Spire Global and Vestas Wind go up and down completely randomly.

Pair Corralation between Spire Global and Vestas Wind

Given the investment horizon of 90 days Spire Global is expected to under-perform the Vestas Wind. In addition to that, Spire Global is 2.76 times more volatile than Vestas Wind Systems. It trades about -0.01 of its total potential returns per unit of risk. Vestas Wind Systems is currently generating about -0.01 per unit of volatility. If you would invest  1,472  in Vestas Wind Systems on November 29, 2024 and sell it today you would lose (62.00) from holding Vestas Wind Systems or give up 4.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Spire Global  vs.  Vestas Wind Systems

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 latest unfluctuating performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Vestas Wind Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Vestas Wind is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Spire Global and Vestas Wind

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

The idea behind Spire Global and Vestas Wind Systems 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.