Correlation Between ClearShares OCIO and SPDR SSgA

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

By analyzing existing cross correlation between ClearShares OCIO ETF and SPDR SSgA Income, you can compare the effects of market volatilities on ClearShares OCIO 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 ClearShares OCIO with a short position of SPDR SSgA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ClearShares OCIO and SPDR SSgA.

Diversification Opportunities for ClearShares OCIO and SPDR SSgA

0.21

Correlation Coefficient

ClearShares OCIO  SPDR SSgA

Modest diversification

The 3 months correlation between ClearShares and SPDR is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding ClearShares OCIO ETF 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 ClearShares OCIO 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 ClearShares OCIO ETF 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 ClearShares OCIO i.e., ClearShares OCIO and SPDR SSgA go up and down completely randomly.

Pair Corralation between ClearShares OCIO and SPDR SSgA

Given the investment horizon of 90 days ClearShares OCIO ETF is expected to under-perform the SPDR SSgA. In addition to that, ClearShares OCIO is 2.03 times more volatile than SPDR SSgA Income. It trades about -0.05 of its total potential returns per unit of risk. SPDR SSgA Income is currently generating about 0.1 per unit of volatility. If you would invest  3,105  in SPDR SSgA Income on December 29, 2024 and sell it today you would earn a total of  69.00  from holding SPDR SSgA Income or generate 2.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ClearShares OCIO ETF  vs.  SPDR SSgA Income

ClearShares OCIO ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days ClearShares OCIO ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, ClearShares OCIO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

SPDR SSgA Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSgA Income are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with ClearShares OCIO and SPDR SSgA

The main advantage of trading using opposite ClearShares OCIO and SPDR SSgA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ClearShares OCIO 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 ClearShares OCIO ETF 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.