Correlation Between SPDR Barclays and Quadratic Deflation

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

By analyzing existing cross correlation between SPDR Barclays Long and Quadratic Deflation ETF, you can compare the effects of market volatilities on SPDR Barclays and Quadratic Deflation 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 Barclays with a short position of Quadratic Deflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Barclays and Quadratic Deflation.

Diversification Opportunities for SPDR Barclays and Quadratic Deflation

0.04

Correlation Coefficient

SPDR Barclays  Quadratic Deflation

Significant diversification

The 3 months correlation between SPDR and Quadratic is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Barclays Long and Quadratic Deflation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quadratic Deflation ETF and SPDR Barclays 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 Barclays Long are associated (or correlated) with Quadratic Deflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quadratic Deflation ETF has no effect on the direction of SPDR Barclays i.e., SPDR Barclays and Quadratic Deflation go up and down completely randomly.

Pair Corralation between SPDR Barclays and Quadratic Deflation

Given the investment horizon of 90 days SPDR Barclays Long is expected to under-perform the Quadratic Deflation. In addition to that, SPDR Barclays is 1.13 times more volatile than Quadratic Deflation ETF. It trades about -0.12 of its total potential returns per unit of risk. Quadratic Deflation ETF is currently generating about -0.07 per unit of volatility. If you would invest  1,487  in Quadratic Deflation ETF on January 25, 2024 and sell it today you would lose (31.00) from holding Quadratic Deflation ETF or give up 2.08% of portfolio value over 90 days.

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

SPDR Barclays Long  vs.  Quadratic Deflation ETF

SPDR Barclays Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Barclays Long has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR Barclays is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Quadratic Deflation ETF

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quadratic Deflation ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Quadratic Deflation is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR Barclays and Quadratic Deflation

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

The idea behind SPDR Barclays Long and Quadratic Deflation ETF 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.