Correlation Between Xtrackers Short and SSgA SPDR

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

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

Diversification Opportunities for Xtrackers Short and SSgA SPDR

0.86

Correlation Coefficient

Xtrackers Short  SSgA SPDR

Very poor diversification

The 3 months correlation between Xtrackers and SSgA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Short Duration and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs and Xtrackers Short 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 Xtrackers Short Duration are associated (or correlated) with SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Xtrackers Short i.e., Xtrackers Short and SSgA SPDR go up and down completely randomly.

Pair Corralation between Xtrackers Short and SSgA SPDR

Given the investment horizon of 90 days Xtrackers Short is expected to generate 1.49 times less return on investment than SSgA SPDR. But when comparing it to its historical volatility, Xtrackers Short Duration is 4.39 times less risky than SSgA SPDR. It trades about 0.15 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,936  in SSgA SPDR ETFs on September 30, 2024 and sell it today you would earn a total of  1,713  from holding SSgA SPDR ETFs or generate 21.59% return on investment over 90 days.

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

Xtrackers Short Duration  vs.  SSgA SPDR ETFs

Xtrackers Short Duration

Risk-Adjusted Performance

2 of 100

Weak

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

SSgA SPDR ETFs

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR ETFs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SSgA SPDR is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers Short and SSgA SPDR

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

The idea behind Xtrackers Short Duration and SSgA SPDR ETFs 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.