Correlation Between SPDR SSGA and Strategy Shares

Can any of the company-specific risk be diversified away by investing in both SPDR SSGA and Strategy Shares 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 Strategy Shares 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 Strategy Shares , you can compare the effects of market volatilities on SPDR SSGA and Strategy Shares 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 Strategy Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SSGA and Strategy Shares.

Diversification Opportunities for SPDR SSGA and Strategy Shares

0.96

Correlation Coefficient

SPDR SSGA  Strategy Shares

Almost no diversification

The 3 months correlation between SPDR and Strategy is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSGA Fixed and Strategy Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategy Shares 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 Strategy Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategy Shares has no effect on the direction of SPDR SSGA i.e., SPDR SSGA and Strategy Shares go up and down completely randomly.

Pair Corralation between SPDR SSGA and Strategy Shares

Given the investment horizon of 90 days SPDR SSGA Fixed is expected to generate 1.17 times more return on investment than Strategy Shares. However, SPDR SSGA is 1.17 times more volatile than Strategy Shares . It trades about 0.03 of its potential returns per unit of risk. Strategy Shares is currently generating about 0.03 per unit of risk. If you would invest  2,413  in SPDR SSGA Fixed on September 19, 2024 and sell it today you would earn a total of  156.00  from holding SPDR SSGA Fixed or generate 6.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

SPDR SSGA Fixed  vs.  Strategy Shares

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.

Strategy Shares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strategy Shares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Strategy Shares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SPDR SSGA and Strategy Shares

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

The idea behind SPDR SSGA Fixed and Strategy Shares 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.