Correlation Between SPDR SP and Inspired Plc

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

By analyzing existing cross correlation between SPDR SP Materials and Inspired Plc, you can compare the effects of market volatilities on SPDR SP and Inspired Plc 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 SPDR SP with a short position of Inspired Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Inspired Plc.

Diversification Opportunities for SPDR SP and Inspired Plc

0.71

Correlation Coefficient

SPDR SP  Inspired Plc

Poor diversification

The 3 months correlation between SPDR and Inspired is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Materials and Inspired Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspired Plc and SPDR SP 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 SPDR SP Materials are associated (or correlated) with Inspired Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspired Plc has no effect on the direction of SPDR SP i.e., SPDR SP and Inspired Plc go up and down completely randomly.

Pair Corralation between SPDR SP and Inspired Plc

Assuming the 90 days trading horizon SPDR SP is expected to generate 27.74 times less return on investment than Inspired Plc. But when comparing it to its historical volatility, SPDR SP Materials is 3.82 times less risky than Inspired Plc. It trades about 0.02 of its potential returns per unit of risk. Inspired Plc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,150  in Inspired Plc on December 23, 2024 and sell it today you would earn a total of  1,400  from holding Inspired Plc or generate 33.73% return on investment over 90 days.

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

SPDR SP Materials  vs.  Inspired Plc

SPDR SP Materials

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Materials are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Inspired Plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inspired Plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inspired Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR SP and Inspired Plc

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

The idea behind SPDR SP Materials and Inspired Plc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.