Correlation Between Pender Real and State Street

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

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

Diversification Opportunities for Pender Real and State Street

0.87

Correlation Coefficient

Pender Real  State Street

Very poor diversification

The 3 months correlation between Pender and State is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pender Real Estate and State Street Premier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Premier and Pender Real 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 Pender Real Estate 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 Premier has no effect on the direction of Pender Real i.e., Pender Real and State Street go up and down completely randomly.

Pair Corralation between Pender Real and State Street

Assuming the 90 days horizon Pender Real is expected to generate 3.35 times less return on investment than State Street. But when comparing it to its historical volatility, Pender Real Estate is 21.13 times less risky than State Street. It trades about 0.52 of its potential returns per unit of risk. State Street Premier is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9,038  in State Street Premier on September 5, 2024 and sell it today you would earn a total of  5,532  from holding State Street Premier or generate 61.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	81.62%
Values	Daily Returns

Pender Real Estate  vs.  State Street Premier

Pender Real Estate

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pender Real Estate are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pender Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

State Street Premier

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Premier are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, State Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pender Real and State Street

The main advantage of trading using opposite Pender Real and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pender Real 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 Pender Real Estate and State Street Premier 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.