Correlation Between State Street and City National
Can any of the company-specific risk be diversified away by investing in both State Street and City National 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 State Street and City National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Premier and City National Rochdale, you can compare the effects of market volatilities on State Street and City National 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 State Street with a short position of City National. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and City National.
Diversification Opportunities for State Street and City National
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and City is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding State Street Premier and City National Rochdale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City National Rochdale and State Street 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 State Street Premier are associated (or correlated) with City National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City National Rochdale has no effect on the direction of State Street i.e., State Street and City National go up and down completely randomly.
Pair Corralation between State Street and City National
Assuming the 90 days horizon State Street Premier is expected to generate 1.4 times more return on investment than City National. However, State Street is 1.4 times more volatile than City National Rochdale. It trades about 0.17 of its potential returns per unit of risk. City National Rochdale is currently generating about 0.05 per unit of risk. If you would invest 13,432 in State Street Premier on September 14, 2024 and sell it today you would earn a total of 1,401 from holding State Street Premier or generate 10.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
State Street Premier vs. City National Rochdale
Performance |
Timeline |
State Street Premier |
City National Rochdale |
State Street and City National Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with State Street and City National
The main advantage of trading using opposite State Street and City National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, City National 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 City National will offset losses from the drop in City National's long position.State Street vs. Praxis Growth Index | State Street vs. Small Pany Growth | State Street vs. Qs Defensive Growth | State Street vs. Champlain Mid Cap |
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Check out your portfolio center.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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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