Correlation Between X Square and SSGA Active

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

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

Diversification Opportunities for X Square and SSGA Active

0.21

Correlation Coefficient

X Square  SSGA Active

Modest diversification

The 3 months correlation between SQBIX and SSGA is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding X Square Balanced and SSGA Active Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSGA Active Trust and X Square 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 X Square Balanced are associated (or correlated) with SSGA Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSGA Active Trust has no effect on the direction of X Square i.e., X Square and SSGA Active go up and down completely randomly.

Pair Corralation between X Square and SSGA Active

Assuming the 90 days horizon X Square Balanced is expected to generate 3.29 times more return on investment than SSGA Active. However, X Square is 3.29 times more volatile than SSGA Active Trust. It trades about 0.0 of its potential returns per unit of risk. SSGA Active Trust is currently generating about -0.03 per unit of risk. If you would invest  1,380  in X Square Balanced on December 28, 2024 and sell it today you would lose (3.00) from holding X Square Balanced or give up 0.22% of portfolio value over 90 days.

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

X Square Balanced  vs.  SSGA Active Trust

X Square Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days X Square Balanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, X Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SSGA Active Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days SSGA Active Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SSGA Active is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with X Square and SSGA Active

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

The idea behind X Square Balanced and SSGA Active 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.