Correlation Between State Street and Avantis Core

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

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

Diversification Opportunities for State Street and Avantis Core

-0.36

Correlation Coefficient

State Street  Avantis Core

Very good diversification

The 3 months correlation between State and Avantis is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding State Street Premier and Avantis Core Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Core Municipal and State Street 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 State Street Premier are associated (or correlated) with Avantis Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Core Municipal has no effect on the direction of State Street i.e., State Street and Avantis Core go up and down completely randomly.

Pair Corralation between State Street and Avantis Core

If you would invest  9,985  in State Street Premier on September 12, 2024 and sell it today you would earn a total of  4,719  from holding State Street Premier or generate 47.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.3%
Values	Daily Returns

State Street Premier  vs.  Avantis Core Municipal

State Street Premier

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Premier are ranked lower than 12 (%) 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.

Avantis Core Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with State Street and Avantis Core

The main advantage of trading using opposite State Street and Avantis Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Avantis Core 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 Avantis Core will offset losses from the drop in Avantis Core's long position.

The idea behind State Street Premier and Avantis Core Municipal 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.