Correlation Between SPDR DoubleLine and PSMB

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Can any of the company-specific risk be diversified away by investing in both SPDR DoubleLine and PSMB 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 DoubleLine and PSMB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR DoubleLine Emerging and PSMB, you can compare the effects of market volatilities on SPDR DoubleLine and PSMB 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 DoubleLine with a short position of PSMB. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR DoubleLine and PSMB.

Diversification Opportunities for SPDR DoubleLine and PSMB

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between SPDR and PSMB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR DoubleLine Emerging and PSMB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSMB and SPDR DoubleLine 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 DoubleLine Emerging are associated (or correlated) with PSMB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSMB has no effect on the direction of SPDR DoubleLine i.e., SPDR DoubleLine and PSMB go up and down completely randomly.

Pair Corralation between SPDR DoubleLine and PSMB

Given the investment horizon of 90 days SPDR DoubleLine Emerging is expected to generate 0.56 times more return on investment than PSMB. However, SPDR DoubleLine Emerging is 1.79 times less risky than PSMB. It trades about 0.11 of its potential returns per unit of risk. PSMB is currently generating about -0.02 per unit of risk. If you would invest  3,773  in SPDR DoubleLine Emerging on October 27, 2024 and sell it today you would earn a total of  473.00  from holding SPDR DoubleLine Emerging or generate 12.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy20.85%
ValuesDaily Returns

SPDR DoubleLine Emerging  vs.  PSMB

 Performance 
       Timeline  
SPDR DoubleLine Emerging 

Risk-Adjusted Performance

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Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR DoubleLine Emerging are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.
PSMB 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days PSMB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, PSMB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR DoubleLine and PSMB Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SPDR DoubleLine and PSMB

The main advantage of trading using opposite SPDR DoubleLine and PSMB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR DoubleLine position performs unexpectedly, PSMB 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 PSMB will offset losses from the drop in PSMB's long position.
The idea behind SPDR DoubleLine Emerging and PSMB 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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