Correlation Between State Street and Cboe Vest

Can any of the company-specific risk be diversified away by investing in both State Street and Cboe Vest 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 Cboe Vest 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 Cboe Vest Sp, you can compare the effects of market volatilities on State Street and Cboe Vest 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 Cboe Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Cboe Vest.

Diversification Opportunities for State Street and Cboe Vest

-0.37

Correlation Coefficient

State Street  Cboe Vest

Very good diversification

The 3 months correlation between State and Cboe is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding State Street Premier and Cboe Vest Sp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Vest Sp 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 Cboe Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Vest Sp has no effect on the direction of State Street i.e., State Street and Cboe Vest go up and down completely randomly.

Pair Corralation between State Street and Cboe Vest

Assuming the 90 days horizon State Street Premier is expected to generate 1.8 times more return on investment than Cboe Vest. However, State Street is 1.8 times more volatile than Cboe Vest Sp. It trades about 0.13 of its potential returns per unit of risk. Cboe Vest Sp is currently generating about -0.14 per unit of risk. If you would invest  14,034  in State Street Premier on September 27, 2024 and sell it today you would earn a total of  899.00  from holding State Street Premier or generate 6.41% return on investment over 90 days.

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

State Street Premier  vs.  Cboe Vest Sp

State Street Premier

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Premier are ranked lower than 10 (%) 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.

Cboe Vest Sp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cboe Vest Sp has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with State Street and Cboe Vest

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

The idea behind State Street Premier and Cboe Vest Sp 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.