Correlation Between SPDR SSgA and SPDR Bloomberg

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

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

Diversification Opportunities for SPDR SSgA and SPDR Bloomberg

0.6

Correlation Coefficient

SPDR SSgA  SPDR Bloomberg

Poor diversification

The 3 months correlation between SPDR and SPDR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSgA Income and SPDR Bloomberg Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Emerging 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 Income are associated (or correlated) with SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Emerging has no effect on the direction of SPDR SSgA i.e., SPDR SSgA and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between SPDR SSgA and SPDR Bloomberg

Given the investment horizon of 90 days SPDR SSgA Income is expected to under-perform the SPDR Bloomberg. But the etf apears to be less risky and, when comparing its historical volatility, SPDR SSgA Income is 1.22 times less risky than SPDR Bloomberg. The etf trades about -0.23 of its potential returns per unit of risk. The SPDR Bloomberg Emerging is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1,988  in SPDR Bloomberg Emerging on September 20, 2024 and sell it today you would lose (26.00) from holding SPDR Bloomberg Emerging or give up 1.31% of portfolio value over 90 days.

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

SPDR SSgA Income  vs.  SPDR Bloomberg Emerging

SPDR SSgA Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

SPDR Bloomberg Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR SSgA and SPDR Bloomberg

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

The idea behind SPDR SSgA Income and SPDR Bloomberg Emerging 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.