Correlation Between International Drawdown and SSGA Active

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

By analyzing existing cross correlation between International Drawdown Managed and SSGA Active Trust, you can compare the effects of market volatilities on International Drawdown and SSGA Active 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 International Drawdown with a short position of SSGA Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Drawdown and SSGA Active.

Diversification Opportunities for International Drawdown and SSGA Active

0.22

Correlation Coefficient

International Drawdown  SSGA Active

Modest diversification

The 3 months correlation between International and SSGA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding International Drawdown Managed and SSGA Active Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSGA Active Trust and International Drawdown 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 International Drawdown Managed are associated (or correlated) with SSGA Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSGA Active Trust has no effect on the direction of International Drawdown i.e., International Drawdown and SSGA Active go up and down completely randomly.

Pair Corralation between International Drawdown and SSGA Active

Given the investment horizon of 90 days International Drawdown Managed is expected to generate 4.46 times more return on investment than SSGA Active. However, International Drawdown is 4.46 times more volatile than SSGA Active Trust. It trades about 0.04 of its potential returns per unit of risk. SSGA Active Trust is currently generating about 0.08 per unit of risk. If you would invest  2,034  in International Drawdown Managed on September 15, 2024 and sell it today you would earn a total of  75.00  from holding International Drawdown Managed or generate 3.69% return on investment over 90 days.

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

International Drawdown Managed  vs.  SSGA Active Trust

International Drawdown

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Drawdown Managed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, International Drawdown is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SSGA Active Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSGA Active Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SSGA Active is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with International Drawdown and SSGA Active

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

The idea behind International Drawdown Managed and SSGA Active 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.