Correlation Between State Street and AGF Management

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

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

Diversification Opportunities for State Street and AGF Management

0.9

Correlation Coefficient

State Street  AGF Management

Almost no diversification

The 3 months correlation between State and AGF is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding State Street and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 are associated (or correlated) with AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of State Street i.e., State Street and AGF Management go up and down completely randomly.

Pair Corralation between State Street and AGF Management

Assuming the 90 days horizon State Street is expected to generate 1.96 times less return on investment than AGF Management. But when comparing it to its historical volatility, State Street is 1.73 times less risky than AGF Management. It trades about 0.24 of its potential returns per unit of risk. AGF Management Limited is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  516.00  in AGF Management Limited on August 31, 2024 and sell it today you would earn a total of  219.00  from holding AGF Management Limited or generate 42.44% return on investment over 90 days.

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

State Street  vs.  AGF Management Limited

State Street

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, State Street reported solid returns over the last few months and may actually be approaching a breakup point.

AGF Management

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGF Management Limited are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGF Management reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Street and AGF Management

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

The idea behind State Street and AGF Management Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.