Correlation Between Qs Large and State Street

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

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

Diversification Opportunities for Qs Large and State Street

0.57

Correlation Coefficient

Qs Large  State Street

Very weak diversification

The 3 months correlation between LMUSX and State is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Qs Large Cap and State Street Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Core and Qs Large 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 Qs Large Cap 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 Core has no effect on the direction of Qs Large i.e., Qs Large and State Street go up and down completely randomly.

Pair Corralation between Qs Large and State Street

Assuming the 90 days horizon Qs Large Cap is expected to generate 0.43 times more return on investment than State Street. However, Qs Large Cap is 2.33 times less risky than State Street. It trades about -0.08 of its potential returns per unit of risk. State Street Core is currently generating about -0.12 per unit of risk. If you would invest  2,445  in Qs Large Cap on December 19, 2024 and sell it today you would lose (132.00) from holding Qs Large Cap or give up 5.4% of portfolio value over 90 days.

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

Qs Large Cap  vs.  State Street Core

Qs Large Cap

Risk-Adjusted Performance

Very Weak

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

State Street Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Qs Large and State Street

The main advantage of trading using opposite Qs Large and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qs Large 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 Qs Large Cap and State Street Core 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.