Correlation Between SPDR Bloomberg and SPDR SSgA

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

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

Diversification Opportunities for SPDR Bloomberg and SPDR SSgA

0.66

Correlation Coefficient

SPDR Bloomberg  SPDR SSgA

Poor diversification

The 3 months correlation between SPDR and SPDR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg International and SPDR SSgA Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Global and SPDR Bloomberg 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 Bloomberg International are associated (or correlated) with SPDR SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Global has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and SPDR SSgA go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and SPDR SSgA

Given the investment horizon of 90 days SPDR Bloomberg International is expected to generate 1.04 times more return on investment than SPDR SSgA. However, SPDR Bloomberg is 1.04 times more volatile than SPDR SSgA Global. It trades about 0.09 of its potential returns per unit of risk. SPDR SSgA Global is currently generating about 0.05 per unit of risk. If you would invest  2,847  in SPDR Bloomberg International on December 27, 2024 and sell it today you would earn a total of  87.00  from holding SPDR Bloomberg International or generate 3.06% return on investment over 90 days.

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

SPDR Bloomberg International  vs.  SPDR SSgA Global

SPDR Bloomberg Inter

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR SSgA Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSgA Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR SSgA is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SPDR Bloomberg and SPDR SSgA

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

The idea behind SPDR Bloomberg International and SPDR SSgA Global 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.