Correlation Between SPDR ICE and AAM Low

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

By analyzing existing cross correlation between SPDR ICE Preferred and AAM Low Duration, you can compare the effects of market volatilities on SPDR ICE and AAM Low 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 SPDR ICE with a short position of AAM Low. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR ICE and AAM Low.

Diversification Opportunities for SPDR ICE and AAM Low

0.76

Correlation Coefficient

SPDR ICE  AAM Low

Poor diversification

The 3 months correlation between SPDR and AAM is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SPDR ICE Preferred and AAM Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAM Low Duration and SPDR ICE 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 SPDR ICE Preferred are associated (or correlated) with AAM Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAM Low Duration has no effect on the direction of SPDR ICE i.e., SPDR ICE and AAM Low go up and down completely randomly.

Pair Corralation between SPDR ICE and AAM Low

Considering the 90-day investment horizon SPDR ICE is expected to generate 1.78 times less return on investment than AAM Low. In addition to that, SPDR ICE is 1.79 times more volatile than AAM Low Duration. It trades about 0.02 of its total potential returns per unit of risk. AAM Low Duration is currently generating about 0.07 per unit of volatility. If you would invest  2,026  in AAM Low Duration on December 26, 2024 and sell it today you would earn a total of  29.50  from holding AAM Low Duration or generate 1.46% return on investment over 90 days.

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

SPDR ICE Preferred  vs.  AAM Low Duration

SPDR ICE Preferred

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR ICE Preferred are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR ICE is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

AAM Low Duration

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AAM Low Duration are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, AAM Low is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR ICE and AAM Low

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

The idea behind SPDR ICE Preferred and AAM Low Duration 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.