Correlation Between State Street and Japan Asia

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

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

Diversification Opportunities for State Street and Japan Asia

0.12

Correlation Coefficient

State Street  Japan Asia

Average diversification

The 3 months correlation between State and Japan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Japan Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Asia Investment 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 Japan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Asia Investment has no effect on the direction of State Street i.e., State Street and Japan Asia go up and down completely randomly.

Pair Corralation between State Street and Japan Asia

Assuming the 90 days horizon State Street is expected to generate 1.04 times more return on investment than Japan Asia. However, State Street is 1.04 times more volatile than Japan Asia Investment. It trades about 0.04 of its potential returns per unit of risk. Japan Asia Investment is currently generating about -0.26 per unit of risk. If you would invest  9,331  in State Street on September 25, 2024 and sell it today you would earn a total of  93.00  from holding State Street or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

State Street  vs.  Japan Asia Investment

State Street

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 17 (%) 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.

Japan Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with State Street and Japan Asia

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

The idea behind State Street and Japan Asia Investment 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.