Correlation Between SPDR SSgA and Cabana Target

Can any of the company-specific risk be diversified away by investing in both SPDR SSgA and Cabana Target 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 Cabana Target 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 Cabana Target Drawdown, you can compare the effects of market volatilities on SPDR SSgA and Cabana Target 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 Cabana Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SSgA and Cabana Target.

Diversification Opportunities for SPDR SSgA and Cabana Target

0.96

Correlation Coefficient

SPDR SSgA  Cabana Target

Almost no diversification

The 3 months correlation between SPDR and Cabana is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSgA Income and Cabana Target Drawdown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabana Target Drawdown 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 Cabana Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabana Target Drawdown has no effect on the direction of SPDR SSgA i.e., SPDR SSgA and Cabana Target go up and down completely randomly.

Pair Corralation between SPDR SSgA and Cabana Target

Given the investment horizon of 90 days SPDR SSgA Income is expected to generate 0.99 times more return on investment than Cabana Target. However, SPDR SSgA Income is 1.01 times less risky than Cabana Target. It trades about 0.05 of its potential returns per unit of risk. Cabana Target Drawdown is currently generating about -0.01 per unit of risk. If you would invest  3,061  in SPDR SSgA Income on October 10, 2024 and sell it today you would earn a total of  68.00  from holding SPDR SSgA Income or generate 2.22% return on investment over 90 days.

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

SPDR SSgA Income  vs.  Cabana Target Drawdown

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.

Cabana Target Drawdown

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabana Target Drawdown has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cabana Target is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR SSgA and Cabana Target

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

The idea behind SPDR SSgA Income and Cabana Target Drawdown 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..