Correlation Between Spire Global and IShares SPTSX

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

By analyzing existing cross correlation between Spire Global and iShares SPTSX 60, you can compare the effects of market volatilities on Spire Global and IShares SPTSX 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 IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire Global and IShares SPTSX.

Diversification Opportunities for Spire Global and IShares SPTSX

0.27

Correlation Coefficient

Spire Global  IShares SPTSX

Modest diversification

The 3 months correlation between Spire and IShares is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Spire Global and iShares SPTSX 60 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX 60 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 IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX 60 has no effect on the direction of Spire Global i.e., Spire Global and IShares SPTSX go up and down completely randomly.

Pair Corralation between Spire Global and IShares SPTSX

Given the investment horizon of 90 days Spire Global is expected to under-perform the IShares SPTSX. In addition to that, Spire Global is 11.91 times more volatile than iShares SPTSX 60. It trades about -0.01 of its total potential returns per unit of risk. iShares SPTSX 60 is currently generating about 0.01 per unit of volatility. If you would invest  3,845  in iShares SPTSX 60 on December 1, 2024 and sell it today you would earn a total of  14.00  from holding iShares SPTSX 60 or generate 0.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Spire Global  vs.  iShares SPTSX 60

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.

iShares SPTSX 60

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SPTSX 60 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares SPTSX is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Spire Global and IShares SPTSX

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

The idea behind Spire Global and iShares SPTSX 60 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.