Correlation Between Grupo Sports and State Street

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

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

Diversification Opportunities for Grupo Sports and State Street

0.66

Correlation Coefficient

Grupo Sports  State Street

Poor diversification

The 3 months correlation between Grupo and State is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Sports World and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street and Grupo Sports 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 Grupo Sports World 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 has no effect on the direction of Grupo Sports i.e., Grupo Sports and State Street go up and down completely randomly.

Pair Corralation between Grupo Sports and State Street

Assuming the 90 days trading horizon Grupo Sports World is expected to under-perform the State Street. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Sports World is 2.59 times less risky than State Street. The stock trades about -0.06 of its potential returns per unit of risk. The State Street is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  172,800  in State Street on September 16, 2024 and sell it today you would earn a total of  27,621  from holding State Street or generate 15.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Grupo Sports World  vs.  State Street

Grupo Sports World

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Sports World are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Grupo Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

State Street

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, State Street showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Sports and State Street

The main advantage of trading using opposite Grupo Sports and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Sports 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 Grupo Sports World and State Street 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.