Correlation Between InfraCap MLP and SPDR Morgan

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

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

Diversification Opportunities for InfraCap MLP and SPDR Morgan

0.6

Correlation Coefficient

InfraCap MLP  SPDR Morgan

Poor diversification

The 3 months correlation between InfraCap and SPDR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding InfraCap MLP ETF and SPDR Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Morgan Stanley and InfraCap MLP 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 InfraCap MLP ETF are associated (or correlated) with SPDR Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Morgan Stanley has no effect on the direction of InfraCap MLP i.e., InfraCap MLP and SPDR Morgan go up and down completely randomly.

Pair Corralation between InfraCap MLP and SPDR Morgan

Given the investment horizon of 90 days InfraCap MLP ETF is expected to generate 1.03 times more return on investment than SPDR Morgan. However, InfraCap MLP is 1.03 times more volatile than SPDR Morgan Stanley. It trades about 0.29 of its potential returns per unit of risk. SPDR Morgan Stanley is currently generating about 0.07 per unit of risk. If you would invest  4,009  in InfraCap MLP ETF on August 30, 2024 and sell it today you would earn a total of  606.00  from holding InfraCap MLP ETF or generate 15.12% return on investment over 90 days.

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

InfraCap MLP ETF  vs.  SPDR Morgan Stanley

InfraCap MLP ETF

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InfraCap MLP ETF are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, InfraCap MLP sustained solid returns over the last few months and may actually be approaching a breakup point.

SPDR Morgan Stanley

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Morgan Stanley are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, SPDR Morgan may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with InfraCap MLP and SPDR Morgan

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

The idea behind InfraCap MLP ETF and SPDR Morgan Stanley 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.