Correlation Between Financial Industries and State Street

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

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

Diversification Opportunities for Financial Industries and State Street

0.0

Correlation Coefficient

Financial Industries  State Street

Pay attention - limited upside

The 3 months correlation between Financial and State is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and State Street Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Institu and Financial Industries 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 Financial Industries Fund 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 Institu has no effect on the direction of Financial Industries i.e., Financial Industries and State Street go up and down completely randomly.

Pair Corralation between Financial Industries and State Street

If you would invest  0.00  in State Street Institutional on October 10, 2024 and sell it today you would earn a total of  0.00  from holding State Street Institutional or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Financial Industries Fund  vs.  State Street Institutional

Financial Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financial Industries Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Financial Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

State Street Institu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Financial Industries and State Street

The main advantage of trading using opposite Financial Industries and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries 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 Financial Industries Fund and State Street Institutional 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.