Correlation Between Strats SM and STRATSSM Certificates

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

By analyzing existing cross correlation between Strats SM Trust and STRATSSM Certificates series, you can compare the effects of market volatilities on Strats SM and STRATSSM Certificates 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 Strats SM with a short position of STRATSSM Certificates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strats SM and STRATSSM Certificates.

Diversification Opportunities for Strats SM and STRATSSM Certificates

0.44

Correlation Coefficient

Strats SM  STRATSSM Certificates

Very weak diversification

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

Pair Corralation between Strats SM and STRATSSM Certificates

Considering the 90-day investment horizon Strats SM Trust is expected to under-perform the STRATSSM Certificates. But the stock apears to be less risky and, when comparing its historical volatility, Strats SM Trust is 1.22 times less risky than STRATSSM Certificates. The stock trades about -0.02 of its potential returns per unit of risk. The STRATSSM Certificates series is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,243  in STRATSSM Certificates series on May 14, 2025 and sell it today you would earn a total of  57.00  from holding STRATSSM Certificates series or generate 2.54% return on investment over 90 days.

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

Strats SM Trust  vs.  STRATSSM Certificates series

Strats SM Trust

Risk-Adjusted Performance

Weakest

Over the last 90 days Strats SM Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking indicators, Strats SM is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

STRATSSM Certificates

Risk-Adjusted Performance

Mild

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

Pair Trading with Strats SM and STRATSSM Certificates

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

The idea behind Strats SM Trust and STRATSSM Certificates series 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.