Correlation Between State Street and Artisan Select

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

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

Diversification Opportunities for State Street and Artisan Select

0.72

Correlation Coefficient

State Street  Artisan Select

Poor diversification

The 3 months correlation between State and Artisan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding State Street Equity and Artisan Select Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Select Equity 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 Equity are associated (or correlated) with Artisan Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Select Equity has no effect on the direction of State Street i.e., State Street and Artisan Select go up and down completely randomly.

Pair Corralation between State Street and Artisan Select

Assuming the 90 days horizon State Street Equity is expected to generate 1.07 times more return on investment than Artisan Select. However, State Street is 1.07 times more volatile than Artisan Select Equity. It trades about 0.1 of its potential returns per unit of risk. Artisan Select Equity is currently generating about 0.07 per unit of risk. If you would invest  30,809  in State Street Equity on September 29, 2024 and sell it today you would earn a total of  13,700  from holding State Street Equity or generate 44.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

State Street Equity  vs.  Artisan Select Equity

State Street Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Artisan Select Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artisan Select Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Artisan Select 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 Artisan Select

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

The idea behind State Street Equity and Artisan Select Equity 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.