Correlation Between ALABAMA TAX and SSGA Active

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

By analyzing existing cross correlation between ALABAMA TAX FREE BOND and SSGA Active Trust, you can compare the effects of market volatilities on ALABAMA TAX and SSGA Active 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 ALABAMA TAX with a short position of SSGA Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALABAMA TAX and SSGA Active.

Diversification Opportunities for ALABAMA TAX and SSGA Active

0.34

Correlation Coefficient

ALABAMA TAX  SSGA Active

Weak diversification

The 3 months correlation between ALABAMA and SSGA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ALABAMA TAX FREE BOND and SSGA Active Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSGA Active Trust and ALABAMA TAX 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 ALABAMA TAX FREE BOND are associated (or correlated) with SSGA Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSGA Active Trust has no effect on the direction of ALABAMA TAX i.e., ALABAMA TAX and SSGA Active go up and down completely randomly.

Pair Corralation between ALABAMA TAX and SSGA Active

Assuming the 90 days horizon ALABAMA TAX FREE BOND is expected to generate 3.61 times more return on investment than SSGA Active. However, ALABAMA TAX is 3.61 times more volatile than SSGA Active Trust. It trades about 0.05 of its potential returns per unit of risk. SSGA Active Trust is currently generating about 0.07 per unit of risk. If you would invest  1,083  in ALABAMA TAX FREE BOND on September 30, 2024 and sell it today you would earn a total of  148.00  from holding ALABAMA TAX FREE BOND or generate 13.67% return on investment over 90 days.

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

ALABAMA TAX FREE BOND  vs.  SSGA Active Trust

ALABAMA TAX FREE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALABAMA TAX FREE BOND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

SSGA Active Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ALABAMA TAX and SSGA Active

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

The idea behind ALABAMA TAX FREE BOND and SSGA Active Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.