Correlation Between Credit Enhanced and STRATSSM Certificates

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

By analyzing existing cross correlation between Credit Enhanced Corts and STRATSSM Certificates series, you can compare the effects of market volatilities on Credit Enhanced and STRATSSM Certificates 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 Credit Enhanced with a short position of STRATSSM Certificates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Credit Enhanced and STRATSSM Certificates.

Diversification Opportunities for Credit Enhanced and STRATSSM Certificates

-0.08

Correlation Coefficient

Credit Enhanced  STRATSSM Certificates

Good diversification

The 3 months correlation between Credit and STRATSSM is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Credit Enhanced Corts and STRATSSM Certificates series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATSSM Certificates and Credit Enhanced 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 Credit Enhanced Corts are associated (or correlated) with STRATSSM Certificates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATSSM Certificates has no effect on the direction of Credit Enhanced i.e., Credit Enhanced and STRATSSM Certificates go up and down completely randomly.

Pair Corralation between Credit Enhanced and STRATSSM Certificates

Considering the 90-day investment horizon Credit Enhanced is expected to generate 1.28 times less return on investment than STRATSSM Certificates. But when comparing it to its historical volatility, Credit Enhanced Corts is 1.26 times less risky than STRATSSM Certificates. It trades about 0.06 of its potential returns per unit of risk. STRATSSM Certificates series is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,246  in STRATSSM Certificates series on December 25, 2024 and sell it today you would earn a total of  48.00  from holding STRATSSM Certificates series or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Credit Enhanced Corts  vs.  STRATSSM Certificates series

Credit Enhanced Corts

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Enhanced Corts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

STRATSSM Certificates

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STRATSSM Certificates series are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, STRATSSM Certificates is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Credit Enhanced and STRATSSM Certificates

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

The idea behind Credit Enhanced Corts and STRATSSM Certificates series 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.