Correlation Between Spire and RGC Resources

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

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

Diversification Opportunities for Spire and RGC Resources

0.01

Correlation Coefficient

Spire  RGC Resources

Significant diversification

The 3 months correlation between Spire and RGC is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Spire Inc and RGC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RGC Resources 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 RGC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RGC Resources has no effect on the direction of Spire i.e., Spire and RGC Resources go up and down completely randomly.

Pair Corralation between Spire and RGC Resources

Allowing for the 90-day total investment horizon Spire Inc is expected to under-perform the RGC Resources. But the stock apears to be less risky and, when comparing its historical volatility, Spire Inc is 1.41 times less risky than RGC Resources. The stock trades about -0.11 of its potential returns per unit of risk. The RGC Resources is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,051  in RGC Resources on September 19, 2024 and sell it today you would lose (69.00) from holding RGC Resources or give up 3.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Spire Inc  vs.  RGC Resources

Spire Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spire Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Spire is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

RGC Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RGC Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Spire and RGC Resources

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

The idea behind Spire Inc and RGC Resources 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.