Correlation Between VictoryShares Small and SPDR DoubleLine

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

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

Diversification Opportunities for VictoryShares Small and SPDR DoubleLine

0.8

Correlation Coefficient

VictoryShares Small  SPDR DoubleLine

Very poor diversification

The 3 months correlation between VictoryShares and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares Small Mid and SPDR DoubleLine Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR DoubleLine Short and VictoryShares Small 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 VictoryShares Small Mid are associated (or correlated) with SPDR DoubleLine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR DoubleLine Short has no effect on the direction of VictoryShares Small i.e., VictoryShares Small and SPDR DoubleLine go up and down completely randomly.

Pair Corralation between VictoryShares Small and SPDR DoubleLine

Given the investment horizon of 90 days VictoryShares Small Mid is expected to generate 10.19 times more return on investment than SPDR DoubleLine. However, VictoryShares Small is 10.19 times more volatile than SPDR DoubleLine Short. It trades about 0.1 of its potential returns per unit of risk. SPDR DoubleLine Short is currently generating about 0.22 per unit of risk. If you would invest  6,256  in VictoryShares Small Mid on February 28, 2024 and sell it today you would earn a total of  1,644  from holding VictoryShares Small Mid or generate 26.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

VictoryShares Small Mid  vs.  SPDR DoubleLine Short

VictoryShares Small Mid

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares Small Mid are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, VictoryShares Small is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

SPDR DoubleLine Short

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR DoubleLine Short are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VictoryShares Small and SPDR DoubleLine

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

The idea behind VictoryShares Small Mid and SPDR DoubleLine Short 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.