Correlation Between PPLUS Trust and Strats SM

Can any of the company-specific risk be diversified away by investing in both PPLUS Trust and Strats SM 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 PPLUS Trust and Strats SM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PPLUS Trust Series and Strats SM Trust, you can compare the effects of market volatilities on PPLUS Trust and Strats SM 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 PPLUS Trust with a short position of Strats SM. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPLUS Trust and Strats SM.

Diversification Opportunities for PPLUS Trust and Strats SM

0.2

Correlation Coefficient

PPLUS Trust  Strats SM

Modest diversification

The 3 months correlation between PPLUS and Strats is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding PPLUS Trust Series and Strats SM Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strats SM Trust and PPLUS Trust 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 PPLUS Trust Series are associated (or correlated) with Strats SM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strats SM Trust has no effect on the direction of PPLUS Trust i.e., PPLUS Trust and Strats SM go up and down completely randomly.

Pair Corralation between PPLUS Trust and Strats SM

Considering the 90-day investment horizon PPLUS Trust Series is expected to generate 1.98 times more return on investment than Strats SM. However, PPLUS Trust is 1.98 times more volatile than Strats SM Trust. It trades about 0.04 of its potential returns per unit of risk. Strats SM Trust is currently generating about 0.02 per unit of risk. If you would invest  1,810  in PPLUS Trust Series on September 20, 2024 and sell it today you would earn a total of  466.00  from holding PPLUS Trust Series or generate 25.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.03%
Values	Daily Returns

PPLUS Trust Series  vs.  Strats SM Trust

PPLUS Trust Series

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PPLUS Trust Series has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PPLUS Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Strats SM Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PPLUS Trust and Strats SM

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

The idea behind PPLUS Trust Series and Strats SM Trust 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.