Correlation Between Vontobel Holding and State Street

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

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

Diversification Opportunities for Vontobel Holding and State Street

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Correlation Coefficient

Vontobel Holding  State Street

Pay attention - limited upside

The 3 months correlation between Vontobel and State is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vontobel Holding AG and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Corp and Vontobel Holding 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 Vontobel Holding AG 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 Corp has no effect on the direction of Vontobel Holding i.e., Vontobel Holding and State Street go up and down completely randomly.

Pair Corralation between Vontobel Holding and State Street

Assuming the 90 days horizon Vontobel Holding is expected to generate 3.64 times less return on investment than State Street. But when comparing it to its historical volatility, Vontobel Holding AG is 1.32 times less risky than State Street. It trades about 0.03 of its potential returns per unit of risk. State Street Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,717  in State Street Corp on September 12, 2024 and sell it today you would earn a total of  3,286  from holding State Street Corp or generate 48.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	71.59%
Values	Daily Returns

Vontobel Holding AG  vs.  State Street Corp

Vontobel Holding

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Vontobel Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Vontobel Holding is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

State Street Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, State Street unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vontobel Holding and State Street

The main advantage of trading using opposite Vontobel Holding and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vontobel Holding 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 Vontobel Holding AG and State Street Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.