Correlation Between SPDR Series and Freedom Day

Can any of the company-specific risk be diversified away by investing in both SPDR Series 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 Series 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 Series Trust and Freedom Day Dividend, you can compare the effects of market volatilities on SPDR Series 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 Series with a short position of Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Series and Freedom Day.

Diversification Opportunities for SPDR Series and Freedom Day

0.84

Correlation Coefficient

SPDR Series  Freedom Day

Very poor diversification

The 3 months correlation between SPDR and Freedom is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust 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 Series 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 Series Trust 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 Series i.e., SPDR Series and Freedom Day go up and down completely randomly.

Pair Corralation between SPDR Series and Freedom Day

Given the investment horizon of 90 days SPDR Series Trust is expected to under-perform the Freedom Day. But the etf apears to be less risky and, when comparing its historical volatility, SPDR Series Trust is 1.14 times less risky than Freedom Day. The etf trades about -0.11 of its potential returns per unit of risk. The Freedom Day Dividend is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  3,466  in Freedom Day Dividend on September 12, 2024 and sell it today you would lose (50.00) from holding Freedom Day Dividend or give up 1.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

SPDR Series Trust  vs.  Freedom Day Dividend

SPDR Series Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Series Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, SPDR Series is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Freedom Day Dividend

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Day Dividend are ranked lower than 5 (%) 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 Series and Freedom Day

The main advantage of trading using opposite SPDR Series and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Series 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 Series Trust 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.