Correlation Between Equus Total and State Street

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

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

Diversification Opportunities for Equus Total and State Street

0.55

Correlation Coefficient

Equus Total  State Street

Very weak diversification

The 3 months correlation between Equus and State is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Equus Total Return and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street and Equus Total 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 Equus Total Return 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 has no effect on the direction of Equus Total i.e., Equus Total and State Street go up and down completely randomly.

Pair Corralation between Equus Total and State Street

Considering the 90-day investment horizon Equus Total Return is expected to generate 5.73 times more return on investment than State Street. However, Equus Total is 5.73 times more volatile than State Street. It trades about 0.01 of its potential returns per unit of risk. State Street is currently generating about -0.01 per unit of risk. If you would invest  108.00  in Equus Total Return on December 28, 2024 and sell it today you would lose (2.00) from holding Equus Total Return or give up 1.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Equus Total Return  vs.  State Street

Equus Total Return

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equus Total Return are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Equus Total is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

State Street

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Equus Total and State Street

The main advantage of trading using opposite Equus Total and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equus Total 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 Equus Total Return and State Street 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.