Correlation Between InfraCap MLP and SPDR EURO

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

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

Diversification Opportunities for InfraCap MLP and SPDR EURO

-0.59

Correlation Coefficient

InfraCap MLP  SPDR EURO

Excellent diversification

The 3 months correlation between InfraCap and SPDR is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding InfraCap MLP ETF and SPDR EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR EURO STOXX and InfraCap MLP 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 InfraCap MLP ETF are associated (or correlated) with SPDR EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR EURO STOXX has no effect on the direction of InfraCap MLP i.e., InfraCap MLP and SPDR EURO go up and down completely randomly.

Pair Corralation between InfraCap MLP and SPDR EURO

Given the investment horizon of 90 days InfraCap MLP ETF is expected to generate 1.01 times more return on investment than SPDR EURO. However, InfraCap MLP is 1.01 times more volatile than SPDR EURO STOXX. It trades about 0.2 of its potential returns per unit of risk. SPDR EURO STOXX is currently generating about -0.13 per unit of risk. If you would invest  4,031  in InfraCap MLP ETF on August 30, 2024 and sell it today you would earn a total of  584.00  from holding InfraCap MLP ETF or generate 14.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

InfraCap MLP ETF  vs.  SPDR EURO STOXX

InfraCap MLP ETF

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InfraCap MLP ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, InfraCap MLP sustained solid returns over the last few months and may actually be approaching a breakup point.

SPDR EURO STOXX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR EURO STOXX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with InfraCap MLP and SPDR EURO

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

The idea behind InfraCap MLP ETF and SPDR EURO STOXX 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.