Correlation Between SPDR SSgA and STF Tactical

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

Diversification Opportunities for SPDR SSgA and STF Tactical

0.04

Correlation Coefficient

SPDR SSgA  STF Tactical

Significant diversification

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

Pair Corralation between SPDR SSgA and STF Tactical

Given the investment horizon of 90 days SPDR SSgA Income is expected to under-perform the STF Tactical. But the etf apears to be less risky and, when comparing its historical volatility, SPDR SSgA Income is 3.11 times less risky than STF Tactical. The etf trades about -0.03 of its potential returns per unit of risk. The STF Tactical Growth is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,260  in STF Tactical Growth on September 13, 2024 and sell it today you would earn a total of  368.00  from holding STF Tactical Growth or generate 11.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

SPDR SSgA Income  vs.  STF Tactical Growth

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.

STF Tactical Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STF Tactical Growth are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, STF Tactical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR SSgA and STF Tactical

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

The idea behind SPDR SSgA Income and STF Tactical Growth 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.