Correlation Between Sirius XM and SP Global

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

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

Diversification Opportunities for Sirius XM and SP Global

0.74

Correlation Coefficient

Sirius XM  SP Global

Poor diversification

The 3 months correlation between Sirius and SPGI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sirius XM Holding and SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Global and Sirius XM 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 Sirius XM Holding are associated (or correlated) with SP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Global has no effect on the direction of Sirius XM i.e., Sirius XM and SP Global go up and down completely randomly.

Pair Corralation between Sirius XM and SP Global

Given the investment horizon of 90 days Sirius XM is expected to generate 2.92 times less return on investment than SP Global. In addition to that, Sirius XM is 3.42 times more volatile than SP Global. It trades about 0.01 of its total potential returns per unit of risk. SP Global is currently generating about 0.06 per unit of volatility. If you would invest  35,297  in SP Global on January 19, 2024 and sell it today you would earn a total of  6,040  from holding SP Global or generate 17.11% return on investment over 90 days.

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

Sirius XM Holding  vs.  SP Global

Sirius XM Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sirius XM Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, SP Global is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sirius XM and SP Global

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

The idea behind Sirius XM Holding and SP Global 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.