Correlation Between Great Elm and STRATS SM

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

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

Diversification Opportunities for Great Elm and STRATS SM

0.08

Correlation Coefficient

Great Elm  STRATS SM

Significant diversification

The 3 months correlation between Great and STRATS is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Group and STRATS SM Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATS SM Trust and Great Elm 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 Great Elm Group are associated (or correlated) with STRATS SM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATS SM Trust has no effect on the direction of Great Elm i.e., Great Elm and STRATS SM go up and down completely randomly.

Pair Corralation between Great Elm and STRATS SM

Assuming the 90 days horizon Great Elm Group is expected to generate 1.67 times more return on investment than STRATS SM. However, Great Elm is 1.67 times more volatile than STRATS SM Trust. It trades about 0.04 of its potential returns per unit of risk. STRATS SM Trust is currently generating about 0.02 per unit of risk. If you would invest  2,371  in Great Elm Group on September 18, 2024 and sell it today you would earn a total of  50.00  from holding Great Elm Group or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Great Elm Group  vs.  STRATS SM Trust

Great Elm Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Great Elm is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

STRATS SM Trust

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STRATS SM Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, STRATS SM is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Great Elm and STRATS SM

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

The idea behind Great Elm Group and STRATS SM Trust 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.