Correlation Between STRATS SM and Credit Enhanced

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

Diversification Opportunities for STRATS SM and Credit Enhanced

0.24

Correlation Coefficient

STRATS SM  Credit Enhanced

Modest diversification

The 3 months correlation between STRATS and Credit is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding STRATS SM Trust and Credit Enhanced Corts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Enhanced Corts 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 Credit Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Enhanced Corts has no effect on the direction of STRATS SM i.e., STRATS SM and Credit Enhanced go up and down completely randomly.

Pair Corralation between STRATS SM and Credit Enhanced

Considering the 90-day investment horizon STRATS SM Trust is expected to generate 0.79 times more return on investment than Credit Enhanced. However, STRATS SM Trust is 1.26 times less risky than Credit Enhanced. It trades about 0.04 of its potential returns per unit of risk. Credit Enhanced Corts is currently generating about 0.0 per unit of risk. If you would invest  2,244  in STRATS SM Trust on December 28, 2024 and sell it today you would earn a total of  16.00  from holding STRATS SM Trust or generate 0.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.33%
Values	Daily Returns

STRATS SM Trust  vs.  Credit Enhanced Corts

STRATS SM Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STRATS SM Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, STRATS SM is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Credit Enhanced Corts

Risk-Adjusted Performance

Very Weak

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

Pair Trading with STRATS SM and Credit Enhanced

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

The idea behind STRATS SM Trust and Credit Enhanced Corts 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.