Correlation Between SPDR Series and Companhia Siderrgica

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

By analyzing existing cross correlation between SPDR Series Trust and Companhia Siderrgica Nacional, you can compare the effects of market volatilities on SPDR Series and Companhia Siderrgica 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 Series with a short position of Companhia Siderrgica. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Series and Companhia Siderrgica.

Diversification Opportunities for SPDR Series and Companhia Siderrgica

-0.41

Correlation Coefficient

SPDR Series  Companhia Siderrgica

Very good diversification

The 3 months correlation between SPDR and Companhia is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust and Companhia Siderrgica Nacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Siderrgica and SPDR Series 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 Series Trust are associated (or correlated) with Companhia Siderrgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Siderrgica has no effect on the direction of SPDR Series i.e., SPDR Series and Companhia Siderrgica go up and down completely randomly.

Pair Corralation between SPDR Series and Companhia Siderrgica

Assuming the 90 days trading horizon SPDR Series Trust is expected to generate 0.46 times more return on investment than Companhia Siderrgica. However, SPDR Series Trust is 2.16 times less risky than Companhia Siderrgica. It trades about 0.03 of its potential returns per unit of risk. Companhia Siderrgica Nacional is currently generating about 0.01 per unit of risk. If you would invest  262,766  in SPDR Series Trust on December 30, 2024 and sell it today you would earn a total of  7,434  from holding SPDR Series Trust or generate 2.83% return on investment over 90 days.

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

SPDR Series Trust  vs.  Companhia Siderrgica Nacional

SPDR Series Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Series Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SPDR Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Companhia Siderrgica

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SPDR Series and Companhia Siderrgica

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

The idea behind SPDR Series Trust and Companhia Siderrgica Nacional 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.