Correlation Between Xtrackers and SSgA SPDR

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

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

Diversification Opportunities for Xtrackers and SSgA SPDR

-0.29

Correlation Coefficient

Xtrackers  SSgA SPDR

Very good diversification

The 3 months correlation between Xtrackers and SSgA is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers II and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs and Xtrackers 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 Xtrackers II are associated (or correlated) with SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Xtrackers i.e., Xtrackers and SSgA SPDR go up and down completely randomly.

Pair Corralation between Xtrackers and SSgA SPDR

Assuming the 90 days trading horizon Xtrackers II is expected to generate 107.74 times more return on investment than SSgA SPDR. However, Xtrackers is 107.74 times more volatile than SSgA SPDR ETFs. It trades about 0.04 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.02 per unit of risk. If you would invest  923.00  in Xtrackers II on September 23, 2024 and sell it today you would lose (162.00) from holding Xtrackers II or give up 17.55% of portfolio value over 90 days.

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

Xtrackers II   vs.  SSgA SPDR ETFs

Xtrackers II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers II has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xtrackers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SSgA SPDR ETFs

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR ETFs are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, SSgA SPDR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers and SSgA SPDR

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

The idea behind Xtrackers II and SSgA SPDR ETFs 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.