Correlation Between ZEGA Buy and SPDR Russell

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

By analyzing existing cross correlation between ZEGA Buy and and SPDR Russell 1000, you can compare the effects of market volatilities on ZEGA Buy and SPDR Russell 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 ZEGA Buy with a short position of SPDR Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZEGA Buy and SPDR Russell.

Diversification Opportunities for ZEGA Buy and SPDR Russell

0.98

Correlation Coefficient

ZEGA Buy  SPDR Russell

Almost no diversification

The 3 months correlation between ZEGA and SPDR is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding ZEGA Buy and and SPDR Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Russell 1000 and ZEGA Buy 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 ZEGA Buy and are associated (or correlated) with SPDR Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Russell 1000 has no effect on the direction of ZEGA Buy i.e., ZEGA Buy and SPDR Russell go up and down completely randomly.

Pair Corralation between ZEGA Buy and SPDR Russell

Given the investment horizon of 90 days ZEGA Buy and is expected to generate 0.72 times more return on investment than SPDR Russell. However, ZEGA Buy and is 1.39 times less risky than SPDR Russell. It trades about -0.1 of its potential returns per unit of risk. SPDR Russell 1000 is currently generating about -0.08 per unit of risk. If you would invest  1,848  in ZEGA Buy and on January 17, 2024 and sell it today you would lose (25.00) from holding ZEGA Buy and or give up 1.35% of portfolio value over 90 days.

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

ZEGA Buy and  vs.  SPDR Russell 1000

ZEGA Buy

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ZEGA Buy and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, ZEGA Buy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR Russell 1000

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Russell 1000 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, SPDR Russell may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ZEGA Buy and SPDR Russell

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

The idea behind ZEGA Buy and and SPDR Russell 1000 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.