Correlation Between SSGA Active and SPDR MarketAxess

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

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

Diversification Opportunities for SSGA Active and SPDR MarketAxess

0.84

Correlation Coefficient

SSGA Active  SPDR MarketAxess

Very poor diversification

The 3 months correlation between SSGA and SPDR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SSGA Active Trust and SPDR MarketAxess Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MarketAxess Inv and SSGA Active 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 Active Trust are associated (or correlated) with SPDR MarketAxess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MarketAxess Inv has no effect on the direction of SSGA Active i.e., SSGA Active and SPDR MarketAxess go up and down completely randomly.

Pair Corralation between SSGA Active and SPDR MarketAxess

Given the investment horizon of 90 days SSGA Active Trust is expected to generate 0.44 times more return on investment than SPDR MarketAxess. However, SSGA Active Trust is 2.3 times less risky than SPDR MarketAxess. It trades about 0.31 of its potential returns per unit of risk. SPDR MarketAxess Investment is currently generating about 0.13 per unit of risk. If you would invest  2,953  in SSGA Active Trust on September 5, 2024 and sell it today you would earn a total of  46.00  from holding SSGA Active Trust or generate 1.56% return on investment over 90 days.

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

SSGA Active Trust  vs.  SPDR MarketAxess Investment

SSGA Active Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SSGA Active Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

SPDR MarketAxess Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MarketAxess Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, SPDR MarketAxess is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SSGA Active and SPDR MarketAxess

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

The idea behind SSGA Active Trust and SPDR MarketAxess Investment 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.