Correlation Between SSgA SPDR and Franklin LibertyQ

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

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

Diversification Opportunities for SSgA SPDR and Franklin LibertyQ

0.82

Correlation Coefficient

SSgA SPDR  Franklin LibertyQ

Very poor diversification

The 3 months correlation between SSgA and Franklin is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SSgA SPDR ETFs and Franklin LibertyQ Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin LibertyQ Equity and SSgA SPDR 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 SSgA SPDR ETFs are associated (or correlated) with Franklin LibertyQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin LibertyQ Equity has no effect on the direction of SSgA SPDR i.e., SSgA SPDR and Franklin LibertyQ go up and down completely randomly.

Pair Corralation between SSgA SPDR and Franklin LibertyQ

Assuming the 90 days trading horizon SSgA SPDR ETFs is expected to generate 1.69 times more return on investment than Franklin LibertyQ. However, SSgA SPDR is 1.69 times more volatile than Franklin LibertyQ Equity. It trades about 0.17 of its potential returns per unit of risk. Franklin LibertyQ Equity is currently generating about 0.21 per unit of risk. If you would invest  15,844  in SSgA SPDR ETFs on September 5, 2024 and sell it today you would earn a total of  2,116  from holding SSgA SPDR ETFs or generate 13.36% return on investment over 90 days.

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

SSgA SPDR ETFs  vs.  Franklin LibertyQ Equity

SSgA SPDR ETFs

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR ETFs are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SSgA SPDR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Franklin LibertyQ Equity

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin LibertyQ Equity are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Franklin LibertyQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SSgA SPDR and Franklin LibertyQ

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

The idea behind SSgA SPDR ETFs and Franklin LibertyQ Equity 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.