Correlation Between PPLUS Trust and STRATSSM Certificates

Can any of the company-specific risk be diversified away by investing in both PPLUS Trust and STRATSSM Certificates 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 STRATSSM Certificates 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 STRATSSM Certificates series, you can compare the effects of market volatilities on PPLUS Trust and STRATSSM Certificates 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 STRATSSM Certificates. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPLUS Trust and STRATSSM Certificates.

Diversification Opportunities for PPLUS Trust and STRATSSM Certificates

0.04

Correlation Coefficient

PPLUS Trust  STRATSSM Certificates

Significant diversification

The 3 months correlation between PPLUS and STRATSSM is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding PPLUS Trust Series and STRATSSM Certificates series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATSSM Certificates 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 STRATSSM Certificates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATSSM Certificates has no effect on the direction of PPLUS Trust i.e., PPLUS Trust and STRATSSM Certificates go up and down completely randomly.

Pair Corralation between PPLUS Trust and STRATSSM Certificates

Considering the 90-day investment horizon PPLUS Trust Series is expected to under-perform the STRATSSM Certificates. In addition to that, PPLUS Trust is 1.32 times more volatile than STRATSSM Certificates series. It trades about -0.07 of its total potential returns per unit of risk. STRATSSM Certificates series is currently generating about 0.1 per unit of volatility. If you would invest  2,269  in STRATSSM Certificates series on September 20, 2024 and sell it today you would earn a total of  22.00  from holding STRATSSM Certificates series or generate 0.97% return on investment over 90 days.

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

PPLUS Trust Series  vs.  STRATSSM Certificates series

PPLUS Trust Series

Risk-Adjusted Performance

0 of 100

Very 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.

STRATSSM Certificates

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STRATSSM Certificates series are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, STRATSSM Certificates is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PPLUS Trust and STRATSSM Certificates

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

The idea behind PPLUS Trust Series and STRATSSM Certificates series 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.