Correlation Between Thrivent High and SPDR SSgA

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Can any of the company-specific risk be diversified away by investing in both Thrivent High 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 Thrivent High and SPDR SSgA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thrivent High Yield and SPDR SSgA Income, you can compare the effects of market volatilities on Thrivent High 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 Thrivent High with a short position of SPDR SSgA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thrivent High and SPDR SSgA.

Diversification Opportunities for Thrivent High and SPDR SSgA

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Thrivent and SPDR is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent High Yield and SPDR SSgA Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Income and Thrivent High 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 Thrivent High Yield 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 Income has no effect on the direction of Thrivent High i.e., Thrivent High and SPDR SSgA go up and down completely randomly.

Pair Corralation between Thrivent High and SPDR SSgA

Assuming the 90 days horizon Thrivent High is expected to generate 1.08 times less return on investment than SPDR SSgA. But when comparing it to its historical volatility, Thrivent High Yield is 1.8 times less risky than SPDR SSgA. It trades about 0.15 of its potential returns per unit of risk. SPDR SSgA Income is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,054  in SPDR SSgA Income on September 23, 2024 and sell it today you would earn a total of  129.00  from holding SPDR SSgA Income or generate 4.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Thrivent High Yield  vs.  SPDR SSgA Income

 Performance 
       Timeline  
Thrivent High Yield 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Thrivent High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Thrivent High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
SPDR SSgA Income 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 recent stock price disarray, may contribute to short-term losses for the investors.

Thrivent High and SPDR SSgA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Thrivent High and SPDR SSgA

The main advantage of trading using opposite Thrivent High and SPDR SSgA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thrivent High 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 Thrivent High Yield and SPDR SSgA Income 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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