Correlation Between State Street and Acrex

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

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

Diversification Opportunities for State Street and Acrex

-0.68

Correlation Coefficient

State Street  Acrex

Excellent diversification

The 3 months correlation between State and Acrex is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding State Street Smallmid and Acrex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acrex 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 Smallmid are associated (or correlated) with Acrex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acrex has no effect on the direction of State Street i.e., State Street and Acrex go up and down completely randomly.

Pair Corralation between State Street and Acrex

Assuming the 90 days horizon State Street Smallmid is expected to generate 1.14 times more return on investment than Acrex. However, State Street is 1.14 times more volatile than Acrex. It trades about 0.07 of its potential returns per unit of risk. Acrex is currently generating about -0.05 per unit of risk. If you would invest  21,457  in State Street Smallmid on September 28, 2024 and sell it today you would earn a total of  9,098  from holding State Street Smallmid or generate 42.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	38.31%
Values	Daily Returns

State Street Smallmid  vs.  Acrex

State Street Smallmid

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Smallmid are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Acrex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acrex has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with State Street and Acrex

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

The idea behind State Street Smallmid and Acrex 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.