Correlation Between State Street and PRS Reit

Can any of the company-specific risk be diversified away by investing in both State Street and PRS Reit 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 PRS Reit 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 PRS Reit PLC, you can compare the effects of market volatilities on State Street and PRS Reit 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 PRS Reit. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and PRS Reit.

Diversification Opportunities for State Street and PRS Reit

0.77

Correlation Coefficient

State Street  PRS Reit

Poor diversification

The 3 months correlation between State and PRS is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp and PRS Reit PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRS Reit PLC 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 PRS Reit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRS Reit PLC has no effect on the direction of State Street i.e., State Street and PRS Reit go up and down completely randomly.

Pair Corralation between State Street and PRS Reit

Assuming the 90 days trading horizon State Street Corp is expected to generate 0.86 times more return on investment than PRS Reit. However, State Street Corp is 1.16 times less risky than PRS Reit. It trades about 0.19 of its potential returns per unit of risk. PRS Reit PLC is currently generating about 0.14 per unit of risk. If you would invest  8,486  in State Street Corp on September 4, 2024 and sell it today you would earn a total of  1,336  from holding State Street Corp or generate 15.74% return on investment over 90 days.

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

State Street Corp  vs.  PRS Reit PLC

State Street Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Corp are ranked lower than 14 (%) 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.

PRS Reit PLC

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PRS Reit PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PRS Reit unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Street and PRS Reit

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

The idea behind State Street Corp and PRS Reit PLC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.