Correlation Between Affiliated Managers and State Street

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

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

Diversification Opportunities for Affiliated Managers and State Street

0.71

Correlation Coefficient

Affiliated Managers  State Street

Poor diversification

The 3 months correlation between Affiliated and State is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers Group 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 Affiliated Managers 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 Affiliated Managers Group 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 Affiliated Managers i.e., Affiliated Managers and State Street go up and down completely randomly.

Pair Corralation between Affiliated Managers and State Street

Considering the 90-day investment horizon Affiliated Managers Group is expected to generate 0.96 times more return on investment than State Street. However, Affiliated Managers Group is 1.04 times less risky than State Street. It trades about -0.07 of its potential returns per unit of risk. State Street Corp is currently generating about -0.08 per unit of risk. If you would invest  18,524  in Affiliated Managers Group on December 29, 2024 and sell it today you would lose (1,451) from holding Affiliated Managers Group or give up 7.83% of portfolio value over 90 days.

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

Affiliated Managers Group  vs.  State Street Corp

Affiliated Managers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affiliated Managers Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

State Street Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Affiliated Managers and State Street

The main advantage of trading using opposite Affiliated Managers and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affiliated Managers 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 Affiliated Managers Group 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.