Correlation Between State Street and State Street

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

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

Diversification Opportunities for State Street and State Street

0.85

Correlation Coefficient

State Street  State Street

Very poor diversification

The 3 months correlation between State and State is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding State Street Global and State Street Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Emerging 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 Global 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 Emerging has no effect on the direction of State Street i.e., State Street and State Street go up and down completely randomly.

Pair Corralation between State Street and State Street

Assuming the 90 days horizon State Street Global is expected to generate 0.87 times more return on investment than State Street. However, State Street Global is 1.15 times less risky than State Street. It trades about 0.05 of its potential returns per unit of risk. State Street Emerging is currently generating about 0.04 per unit of risk. If you would invest  8,928  in State Street Global on September 26, 2024 and sell it today you would earn a total of  1,732  from holding State Street Global or generate 19.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

State Street Global  vs.  State Street Emerging

State Street Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

State Street Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with State Street and State Street

The main advantage of trading using opposite State Street and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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 State Street Global and State Street Emerging 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.