Correlation Between State Street and BlackRock Capital

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

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

Diversification Opportunities for State Street and BlackRock Capital

0.47

Correlation Coefficient

State Street  BlackRock Capital

Very weak diversification

The 3 months correlation between State and BlackRock is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp and BlackRock Capital Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Capital 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 Corp are associated (or correlated) with BlackRock Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Capital has no effect on the direction of State Street i.e., State Street and BlackRock Capital go up and down completely randomly.

Pair Corralation between State Street and BlackRock Capital

Considering the 90-day investment horizon State Street Corp is expected to generate 1.37 times more return on investment than BlackRock Capital. However, State Street is 1.37 times more volatile than BlackRock Capital Allocation. It trades about 0.01 of its potential returns per unit of risk. BlackRock Capital Allocation is currently generating about -0.21 per unit of risk. If you would invest  9,851  in State Street Corp on September 29, 2024 and sell it today you would earn a total of  7.00  from holding State Street Corp or generate 0.07% return on investment over 90 days.

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

State Street Corp  vs.  BlackRock Capital Allocation

State Street Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, State Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BlackRock Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock Capital Allocation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BlackRock Capital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with State Street and BlackRock Capital

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

The idea behind State Street Corp and BlackRock Capital Allocation 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.