Correlation Between Rational/pier and State Street

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

By analyzing existing cross correlation between Rationalpier 88 Convertible and State Street Target, you can compare the effects of market volatilities on Rational/pier 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/pier with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational/pier and State Street.

Diversification Opportunities for Rational/pier and State Street

0.83

Correlation Coefficient

Rational/pier  State Street

Very poor diversification

The 3 months correlation between Rational/pier and State is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Rationalpier 88 Convertible 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/pier 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 Rationalpier 88 Convertible 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/pier i.e., Rational/pier and State Street go up and down completely randomly.

Pair Corralation between Rational/pier and State Street

Assuming the 90 days horizon Rationalpier 88 Convertible is expected to under-perform the State Street. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rationalpier 88 Convertible is 1.47 times less risky than State Street. The mutual fund trades about -0.06 of its potential returns per unit of risk. The State Street Target is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,566  in State Street Target on December 30, 2024 and sell it today you would lose (7.00) from holding State Street Target or give up 0.45% of portfolio value over 90 days.

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

Rationalpier 88 Convertible  vs.  State Street Target

Rationalpier 88 Conv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rationalpier 88 Convertible has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Rational/pier 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/pier and State Street

The main advantage of trading using opposite Rational/pier and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational/pier 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 Rationalpier 88 Convertible 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.