Correlation Between State Street and Semiconductor Ultrasector

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

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

Diversification Opportunities for State Street and Semiconductor Ultrasector

-0.81

Correlation Coefficient

State Street  Semiconductor Ultrasector

Pay attention - limited upside

The 3 months correlation between State and Semiconductor is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding State Street Income and Semiconductor Ultrasector Prof in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semiconductor Ultrasector 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 Income are associated (or correlated) with Semiconductor Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semiconductor Ultrasector has no effect on the direction of State Street i.e., State Street and Semiconductor Ultrasector go up and down completely randomly.

Pair Corralation between State Street and Semiconductor Ultrasector

Assuming the 90 days horizon State Street Income is expected to generate 0.07 times more return on investment than Semiconductor Ultrasector. However, State Street Income is 14.35 times less risky than Semiconductor Ultrasector. It trades about 0.13 of its potential returns per unit of risk. Semiconductor Ultrasector Profund is currently generating about -0.09 per unit of risk. If you would invest  956.00  in State Street Income on December 30, 2024 and sell it today you would earn a total of  26.00  from holding State Street Income or generate 2.72% return on investment over 90 days.

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

State Street Income  vs.  Semiconductor Ultrasector Prof

State Street Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Semiconductor Ultrasector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Semiconductor Ultrasector Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with State Street and Semiconductor Ultrasector

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

The idea behind State Street Income and Semiconductor Ultrasector Profund 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.