Correlation Between Tidewater and Spire

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

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

Diversification Opportunities for Tidewater and Spire

0.61

Correlation Coefficient

Tidewater  Spire

Poor diversification

The 3 months correlation between Tidewater and Spire is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tidewater and Spire Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Inc and Tidewater 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 Tidewater are associated (or correlated) with Spire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Inc has no effect on the direction of Tidewater i.e., Tidewater and Spire go up and down completely randomly.

Pair Corralation between Tidewater and Spire

Considering the 90-day investment horizon Tidewater is expected to generate 1.67 times less return on investment than Spire. In addition to that, Tidewater is 1.69 times more volatile than Spire Inc. It trades about 0.03 of its total potential returns per unit of risk. Spire Inc is currently generating about 0.09 per unit of volatility. If you would invest  5,986  in Spire Inc on January 25, 2024 and sell it today you would earn a total of  131.00  from holding Spire Inc or generate 2.19% return on investment over 90 days.

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

Tidewater  vs.  Spire Inc

Tidewater

Risk-Adjusted Performance

11 of 100

Good

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

Spire Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Spire may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Tidewater and Spire

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

The idea behind Tidewater and Spire Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.