Correlation Between State Street and Elfun Income

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

By analyzing existing cross correlation between State Street Aggregate and Elfun Income Fund, you can compare the effects of market volatilities on State Street and Elfun Income 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 Elfun Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Elfun Income.

Diversification Opportunities for State Street and Elfun Income

0.99

Correlation Coefficient

State Street  Elfun Income

No risk reduction

The 3 months correlation between State and Elfun is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding State Street Aggregate and Elfun Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elfun Income 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 Aggregate are associated (or correlated) with Elfun Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elfun Income has no effect on the direction of State Street i.e., State Street and Elfun Income go up and down completely randomly.

Pair Corralation between State Street and Elfun Income

Assuming the 90 days horizon State Street Aggregate is expected to generate 0.93 times more return on investment than Elfun Income. However, State Street Aggregate is 1.08 times less risky than Elfun Income. It trades about -0.15 of its potential returns per unit of risk. Elfun Income Fund is currently generating about -0.18 per unit of risk. If you would invest  8,869  in State Street Aggregate on September 14, 2024 and sell it today you would lose (268.00) from holding State Street Aggregate or give up 3.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

State Street Aggregate  vs.  Elfun Income Fund

State Street Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Elfun Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elfun Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Elfun Income 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 Elfun Income

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

The idea behind State Street Aggregate and Elfun Income Fund 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..