Correlation Between State Street and Eaton Vance

Can any of the company-specific risk be diversified away by investing in both State Street and Eaton Vance 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 Eaton Vance 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 Eaton Vance Municipal, you can compare the effects of market volatilities on State Street and Eaton Vance 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 Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Eaton Vance.

Diversification Opportunities for State Street and Eaton Vance

-0.6

Correlation Coefficient

State Street  Eaton Vance

Excellent diversification

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

Pair Corralation between State Street and Eaton Vance

Assuming the 90 days horizon State Street Premier is expected to generate 6.16 times more return on investment than Eaton Vance. However, State Street is 6.16 times more volatile than Eaton Vance Municipal. It trades about 0.17 of its potential returns per unit of risk. Eaton Vance Municipal is currently generating about -0.09 per unit of risk. If you would invest  13,432  in State Street Premier on September 16, 2024 and sell it today you would earn a total of  1,427  from holding State Street Premier or generate 10.62% return on investment over 90 days.

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

State Street Premier  vs.  Eaton Vance Municipal

State Street Premier

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Premier are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, State Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Eaton Vance Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Eaton Vance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with State Street and Eaton Vance

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

The idea behind State Street Premier and Eaton Vance Municipal 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 CEOs Directory module to screen CEOs from public companies around the world.