Correlation Between SPDR Galaxy and Freedom Day

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

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

Diversification Opportunities for SPDR Galaxy and Freedom Day

0.29

Correlation Coefficient

SPDR Galaxy  Freedom Day

Modest diversification

The 3 months correlation between SPDR and Freedom is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Galaxy Hedged and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend and SPDR Galaxy 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 Galaxy Hedged are associated (or correlated) with Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of SPDR Galaxy i.e., SPDR Galaxy and Freedom Day go up and down completely randomly.

Pair Corralation between SPDR Galaxy and Freedom Day

Given the investment horizon of 90 days SPDR Galaxy Hedged is expected to generate 3.78 times more return on investment than Freedom Day. However, SPDR Galaxy is 3.78 times more volatile than Freedom Day Dividend. It trades about 0.26 of its potential returns per unit of risk. Freedom Day Dividend is currently generating about 0.12 per unit of risk. If you would invest  2,525  in SPDR Galaxy Hedged on September 2, 2024 and sell it today you would earn a total of  1,287  from holding SPDR Galaxy Hedged or generate 50.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.19%
Values	Daily Returns

SPDR Galaxy Hedged  vs.  Freedom Day Dividend

SPDR Galaxy Hedged

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Galaxy Hedged are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, SPDR Galaxy displayed solid returns over the last few months and may actually be approaching a breakup point.

Freedom Day Dividend

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Day Dividend are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR Galaxy and Freedom Day

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

The idea behind SPDR Galaxy Hedged and Freedom Day Dividend 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.