Correlation Between Focus Financial and State Street

Can any of the company-specific risk be diversified away by investing in both Focus Financial and State Street 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 Focus Financial and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Focus Financial Partners and State Street Corp, you can compare the effects of market volatilities on Focus Financial and State Street 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 Focus Financial with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Financial and State Street.

Diversification Opportunities for Focus Financial and State Street

0.84

Correlation Coefficient

Focus Financial  State Street

Very poor diversification

The 3 months correlation between Focus and State is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Focus Financial Partners and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Corp and Focus Financial 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 Focus Financial Partners are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Corp has no effect on the direction of Focus Financial i.e., Focus Financial and State Street go up and down completely randomly.

Pair Corralation between Focus Financial and State Street

If you would invest  9,851  in State Street Corp on September 29, 2024 and sell it today you would earn a total of  7.00  from holding State Street Corp or generate 0.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	5.0%
Values	Daily Returns

Focus Financial Partners  vs.  State Street Corp

Focus Financial Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Financial Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Focus Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

State Street Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, State Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Focus Financial and State Street

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

The idea behind Focus Financial Partners and State Street Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.