Correlation Between FibroGen and State Street

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

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

Diversification Opportunities for FibroGen and State Street

0.16

Correlation Coefficient

FibroGen  State Street

Average diversification

The 3 months correlation between FibroGen and State is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding FibroGen and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street and FibroGen 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 FibroGen 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 FibroGen i.e., FibroGen and State Street go up and down completely randomly.

Pair Corralation between FibroGen and State Street

Assuming the 90 days trading horizon FibroGen is expected to under-perform the State Street. In addition to that, FibroGen is 2.72 times more volatile than State Street. It trades about -0.03 of its total potential returns per unit of risk. State Street is currently generating about 0.18 per unit of volatility. If you would invest  165,890  in State Street on September 17, 2024 and sell it today you would earn a total of  34,531  from holding State Street or generate 20.82% return on investment over 90 days.

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

FibroGen  vs.  State Street

FibroGen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FibroGen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

State Street

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, State Street showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FibroGen and State Street

The main advantage of trading using opposite FibroGen and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FibroGen 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 FibroGen 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.