Correlation Between SPDR SP and SSgA

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

By analyzing existing cross correlation between SPDR SP 400 and SSgA, you can compare the effects of market volatilities on SPDR SP and SSgA 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 SP with a short position of SSgA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and SSgA.

Diversification Opportunities for SPDR SP and SSgA

-0.07

Correlation Coefficient

SPDR SP  SSgA

Good diversification

The 3 months correlation between SPDR and SSgA is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 400 and SSgA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA and SPDR SP 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 SP 400 are associated (or correlated) with SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA has no effect on the direction of SPDR SP i.e., SPDR SP and SSgA go up and down completely randomly.

Pair Corralation between SPDR SP and SSgA

If you would invest  8,411  in SPDR SP 400 on July 5, 2024 and sell it today you would earn a total of  299.00  from holding SPDR SP 400 or generate 3.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.35%
Values	Daily Returns

SPDR SP 400  vs.  SSgA

SPDR SP 400

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP 400 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SSgA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SPDR SP and SSgA

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

The idea behind SPDR SP 400 and SSgA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.