Correlation Between Spire and Utilities Portfolio

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

By analyzing existing cross correlation between Spire Inc and Utilities Portfolio Utilities, you can compare the effects of market volatilities on Spire and Utilities Portfolio 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 with a short position of Utilities Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire and Utilities Portfolio.

Diversification Opportunities for Spire and Utilities Portfolio

0.23

Correlation Coefficient

Spire  Utilities Portfolio

Modest diversification

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

Pair Corralation between Spire and Utilities Portfolio

Allowing for the 90-day total investment horizon Spire Inc is expected to generate 1.17 times more return on investment than Utilities Portfolio. However, Spire is 1.17 times more volatile than Utilities Portfolio Utilities. It trades about 0.2 of its potential returns per unit of risk. Utilities Portfolio Utilities is currently generating about 0.02 per unit of risk. If you would invest  6,676  in Spire Inc on December 28, 2024 and sell it today you would earn a total of  1,144  from holding Spire Inc or generate 17.14% return on investment over 90 days.

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

Spire Inc  vs.  Utilities Portfolio Utilities

Spire Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Spire reported solid returns over the last few months and may actually be approaching a breakup point.

Utilities Portfolio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Portfolio Utilities are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Utilities Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Spire and Utilities Portfolio

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

The idea behind Spire Inc and Utilities Portfolio Utilities 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.