Correlation Between Superior Plus and SPDR ICE

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

By analyzing existing cross correlation between Superior Plus Corp and SPDR ICE BofA, you can compare the effects of market volatilities on Superior Plus and SPDR ICE 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 Superior Plus with a short position of SPDR ICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and SPDR ICE.

Diversification Opportunities for Superior Plus and SPDR ICE

0.61

Correlation Coefficient

Superior Plus  SPDR ICE

Poor diversification

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

Pair Corralation between Superior Plus and SPDR ICE

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the SPDR ICE. In addition to that, Superior Plus is 10.28 times more volatile than SPDR ICE BofA. It trades about -0.03 of its total potential returns per unit of risk. SPDR ICE BofA is currently generating about 0.06 per unit of volatility. If you would invest  2,747  in SPDR ICE BofA on October 10, 2024 and sell it today you would earn a total of  159.00  from holding SPDR ICE BofA or generate 5.79% return on investment over 90 days.

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

Superior Plus Corp  vs.  SPDR ICE BofA

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SPDR ICE BofA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR ICE BofA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR ICE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Superior Plus and SPDR ICE

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

The idea behind Superior Plus Corp and SPDR ICE BofA 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.