Correlation Between SSgA SPDR and BNPP BONDSRI

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

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

Diversification Opportunities for SSgA SPDR and BNPP BONDSRI

0.75

Correlation Coefficient

SSgA SPDR  BNPP BONDSRI

Poor diversification

The 3 months correlation between SSgA and BNPP is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SSgA SPDR ETFs and BNPP BONDSRI ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNPP BONDSRI ETF and SSgA SPDR 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 SSgA SPDR ETFs are associated (or correlated) with BNPP BONDSRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNPP BONDSRI ETF has no effect on the direction of SSgA SPDR i.e., SSgA SPDR and BNPP BONDSRI go up and down completely randomly.

Pair Corralation between SSgA SPDR and BNPP BONDSRI

Assuming the 90 days trading horizon SSgA SPDR is expected to generate 3.49 times less return on investment than BNPP BONDSRI. In addition to that, SSgA SPDR is 1.69 times more volatile than BNPP BONDSRI ETF. It trades about 0.01 of its total potential returns per unit of risk. BNPP BONDSRI ETF is currently generating about 0.07 per unit of volatility. If you would invest  940.00  in BNPP BONDSRI ETF on September 28, 2024 and sell it today you would earn a total of  8.00  from holding BNPP BONDSRI ETF or generate 0.85% return on investment over 90 days.

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

SSgA SPDR ETFs  vs.  BNPP BONDSRI ETF

SSgA SPDR ETFs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSgA SPDR ETFs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SSgA SPDR is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BNPP BONDSRI ETF

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BNPP BONDSRI ETF are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, BNPP BONDSRI is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SSgA SPDR and BNPP BONDSRI

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

The idea behind SSgA SPDR ETFs and BNPP BONDSRI ETF 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.