Correlation Between Strats SM and Strats Trust

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

By analyzing existing cross correlation between Strats SM Trust and Strats Trust Cellular, you can compare the effects of market volatilities on Strats SM and Strats Trust 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 Strats SM with a short position of Strats Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strats SM and Strats Trust.

Diversification Opportunities for Strats SM and Strats Trust

-0.16

Correlation Coefficient

Strats SM  Strats Trust

Good diversification

The 3 months correlation between Strats and Strats is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Strats SM Trust and Strats Trust Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strats Trust Cellular and Strats SM 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 Strats SM Trust are associated (or correlated) with Strats Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strats Trust Cellular has no effect on the direction of Strats SM i.e., Strats SM and Strats Trust go up and down completely randomly.

Pair Corralation between Strats SM and Strats Trust

Considering the 90-day investment horizon Strats SM is expected to generate 7.14 times less return on investment than Strats Trust. But when comparing it to its historical volatility, Strats SM Trust is 6.07 times less risky than Strats Trust. It trades about 0.04 of its potential returns per unit of risk. Strats Trust Cellular is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  956.00  in Strats Trust Cellular on September 19, 2024 and sell it today you would earn a total of  14.00  from holding Strats Trust Cellular or generate 1.46% return on investment over 90 days.

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

Strats SM Trust  vs.  Strats Trust Cellular

Strats SM Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Strats SM Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, Strats SM is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Strats Trust Cellular

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strats Trust Cellular are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking indicators, Strats Trust is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Strats SM and Strats Trust

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

The idea behind Strats SM Trust and Strats Trust Cellular 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.