Correlation Between SPDR SSGA and SPDR Portfolio

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

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

Diversification Opportunities for SPDR SSGA and SPDR Portfolio

0.97

Correlation Coefficient

SPDR SSGA  SPDR Portfolio

Almost no diversification

The 3 months correlation between SPDR and SPDR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSGA Fixed and SPDR Portfolio Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Corporate and SPDR SSGA 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 SSGA Fixed are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Corporate has no effect on the direction of SPDR SSGA i.e., SPDR SSGA and SPDR Portfolio go up and down completely randomly.

Pair Corralation between SPDR SSGA and SPDR Portfolio

Given the investment horizon of 90 days SPDR SSGA is expected to generate 1.18 times less return on investment than SPDR Portfolio. But when comparing it to its historical volatility, SPDR SSGA Fixed is 1.04 times less risky than SPDR Portfolio. It trades about 0.08 of its potential returns per unit of risk. SPDR Portfolio Corporate is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,889  in SPDR Portfolio Corporate on September 18, 2024 and sell it today you would earn a total of  20.00  from holding SPDR Portfolio Corporate or generate 0.69% return on investment over 90 days.

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

SPDR SSGA Fixed  vs.  SPDR Portfolio Corporate

SPDR SSGA Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSGA Fixed has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SPDR SSGA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

SPDR Portfolio Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, SPDR Portfolio is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR SSGA and SPDR Portfolio

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

The idea behind SPDR SSGA Fixed and SPDR Portfolio Corporate 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 Commodity Directory module to find actively traded commodities issued by global exchanges.