Correlation Between Themes Transatlantic and SPDR SP

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

By analyzing existing cross correlation between Themes Transatlantic Defense and SPDR SP Transportation, you can compare the effects of market volatilities on Themes Transatlantic and SPDR SP 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 Themes Transatlantic with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Themes Transatlantic and SPDR SP.

Diversification Opportunities for Themes Transatlantic and SPDR SP

-0.83

Correlation Coefficient

Themes Transatlantic  SPDR SP

Pay attention - limited upside

The 3 months correlation between Themes and SPDR is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Themes Transatlantic Defense and SPDR SP Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Transportation and Themes Transatlantic 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 Themes Transatlantic Defense are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Transportation has no effect on the direction of Themes Transatlantic i.e., Themes Transatlantic and SPDR SP go up and down completely randomly.

Pair Corralation between Themes Transatlantic and SPDR SP

Given the investment horizon of 90 days Themes Transatlantic Defense is expected to generate 0.96 times more return on investment than SPDR SP. However, Themes Transatlantic Defense is 1.04 times less risky than SPDR SP. It trades about 0.18 of its potential returns per unit of risk. SPDR SP Transportation is currently generating about -0.17 per unit of risk. If you would invest  2,591  in Themes Transatlantic Defense on December 26, 2024 and sell it today you would earn a total of  373.00  from holding Themes Transatlantic Defense or generate 14.4% return on investment over 90 days.

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

Themes Transatlantic Defense  vs.  SPDR SP Transportation

Themes Transatlantic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Transatlantic Defense are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Themes Transatlantic displayed solid returns over the last few months and may actually be approaching a breakup point.

SPDR SP Transportation

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Themes Transatlantic and SPDR SP

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

The idea behind Themes Transatlantic Defense and SPDR SP Transportation 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.