Correlation Between SSGA Active and WisdomTree Alternative

Can any of the company-specific risk be diversified away by investing in both SSGA Active and WisdomTree Alternative 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 SSGA Active and WisdomTree Alternative into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SSGA Active Trust and WisdomTree Alternative Income, you can compare the effects of market volatilities on SSGA Active and WisdomTree Alternative 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 SSGA Active with a short position of WisdomTree Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSGA Active and WisdomTree Alternative.

Diversification Opportunities for SSGA Active and WisdomTree Alternative

0.53

Correlation Coefficient

SSGA Active  WisdomTree Alternative

Very weak diversification

The 3 months correlation between SSGA and WisdomTree is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding SSGA Active Trust and WisdomTree Alternative Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Alternative and SSGA Active 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 SSGA Active Trust are associated (or correlated) with WisdomTree Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Alternative has no effect on the direction of SSGA Active i.e., SSGA Active and WisdomTree Alternative go up and down completely randomly.

Pair Corralation between SSGA Active and WisdomTree Alternative

Given the investment horizon of 90 days SSGA Active is expected to generate 1.28 times less return on investment than WisdomTree Alternative. But when comparing it to its historical volatility, SSGA Active Trust is 3.72 times less risky than WisdomTree Alternative. It trades about 0.14 of its potential returns per unit of risk. WisdomTree Alternative Income is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,730  in WisdomTree Alternative Income on December 29, 2024 and sell it today you would earn a total of  37.00  from holding WisdomTree Alternative Income or generate 2.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

SSGA Active Trust  vs.  WisdomTree Alternative Income

SSGA Active Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SSGA Active Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SSGA Active is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

WisdomTree Alternative

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Alternative Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, WisdomTree Alternative is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SSGA Active and WisdomTree Alternative

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

The idea behind SSGA Active Trust and WisdomTree Alternative 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.