Correlation Between SPDR SSgA and SPDR DoubleLine

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

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

Diversification Opportunities for SPDR SSgA and SPDR DoubleLine

0.44

Correlation Coefficient

SPDR SSgA  SPDR DoubleLine

Very weak diversification

The 3 months correlation between SPDR and SPDR is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSgA Ultra and SPDR DoubleLine Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR DoubleLine Short and SPDR SSgA 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 SSgA Ultra are associated (or correlated) with SPDR DoubleLine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR DoubleLine Short has no effect on the direction of SPDR SSgA i.e., SPDR SSgA and SPDR DoubleLine go up and down completely randomly.

Pair Corralation between SPDR SSgA and SPDR DoubleLine

Given the investment horizon of 90 days SPDR SSgA is expected to generate 1.25 times less return on investment than SPDR DoubleLine. But when comparing it to its historical volatility, SPDR SSgA Ultra is 2.68 times less risky than SPDR DoubleLine. It trades about 0.55 of its potential returns per unit of risk. SPDR DoubleLine Short is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  4,673  in SPDR DoubleLine Short on September 5, 2024 and sell it today you would earn a total of  29.00  from holding SPDR DoubleLine Short or generate 0.62% return on investment over 90 days.

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

SPDR SSgA Ultra  vs.  SPDR DoubleLine Short

SPDR SSgA Ultra

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSgA Ultra are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SSgA is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR DoubleLine Short

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR DoubleLine Short are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SSgA and SPDR DoubleLine

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

The idea behind SPDR SSgA Ultra and SPDR DoubleLine Short 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.