Correlation Between Rational Dividend and State Street

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

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

Diversification Opportunities for Rational Dividend and State Street

0.43

Correlation Coefficient

Rational Dividend  State Street

Very weak diversification

The 3 months correlation between Rational and State is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Rational Dividend Capture and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target and Rational Dividend 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 Rational Dividend Capture 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 Target has no effect on the direction of Rational Dividend i.e., Rational Dividend and State Street go up and down completely randomly.

Pair Corralation between Rational Dividend and State Street

Assuming the 90 days horizon Rational Dividend Capture is expected to under-perform the State Street. In addition to that, Rational Dividend is 1.04 times more volatile than State Street Target. It trades about -0.08 of its total potential returns per unit of risk. State Street Target is currently generating about -0.04 per unit of volatility. If you would invest  1,237  in State Street Target on December 21, 2024 and sell it today you would lose (20.00) from holding State Street Target or give up 1.62% of portfolio value over 90 days.

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

Rational Dividend Capture  vs.  State Street Target

Rational Dividend Capture

Risk-Adjusted Performance

Very Weak

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

State Street Target

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street Target 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 Rational Dividend and State Street

The main advantage of trading using opposite Rational Dividend and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Dividend 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 Rational Dividend Capture and State Street Target 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.