Correlation Between Strats SM and Structured Products

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

Diversification Opportunities for Strats SM and Structured Products

0.04

Correlation Coefficient

Strats SM  Structured Products

Significant diversification

The 3 months correlation between Strats and Structured is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Strats SM Trust and Structured Products Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Structured Products Corp 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 Structured Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Structured Products Corp has no effect on the direction of Strats SM i.e., Strats SM and Structured Products go up and down completely randomly.

Pair Corralation between Strats SM and Structured Products

Considering the 90-day investment horizon Strats SM Trust is expected to generate 0.6 times more return on investment than Structured Products. However, Strats SM Trust is 1.67 times less risky than Structured Products. It trades about 0.06 of its potential returns per unit of risk. Structured Products Corp is currently generating about 0.03 per unit of risk. If you would invest  2,453  in Strats SM Trust on December 21, 2024 and sell it today you would earn a total of  42.00  from holding Strats SM Trust or generate 1.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Strats SM Trust  vs.  Structured Products Corp

Strats SM Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Strats SM Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Structured Products Corp

Risk-Adjusted Performance

Weak

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

Pair Trading with Strats SM and Structured Products

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

The idea behind Strats SM Trust and Structured Products Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.