Correlation Between State Street and World Precious

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

By analyzing existing cross correlation between State Street Target and World Precious Minerals, you can compare the effects of market volatilities on State Street and World Precious 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 World Precious. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and World Precious.

Diversification Opportunities for State Street and World Precious

0.06

Correlation Coefficient

State Street  World Precious

Significant diversification

The 3 months correlation between State and World is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and World Precious Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Precious Minerals 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 Target are associated (or correlated) with World Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Precious Minerals has no effect on the direction of State Street i.e., State Street and World Precious go up and down completely randomly.

Pair Corralation between State Street and World Precious

Assuming the 90 days horizon State Street Target is expected to under-perform the World Precious. But the mutual fund apears to be less risky and, when comparing its historical volatility, State Street Target is 1.24 times less risky than World Precious. The mutual fund trades about -0.27 of its potential returns per unit of risk. The World Precious Minerals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  154.00  in World Precious Minerals on October 9, 2024 and sell it today you would earn a total of  0.00  from holding World Precious Minerals or generate 0.0% return on investment over 90 days.

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

State Street Target  vs.  World Precious Minerals

State Street Target

Risk-Adjusted Performance

0 of 100

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 forward-looking signals, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

World Precious Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Precious Minerals has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, World Precious 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 World Precious

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

The idea behind State Street Target and World Precious Minerals 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.