Correlation Between State Street and Short Precious

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

Diversification Opportunities for State Street and Short Precious

-0.12

Correlation Coefficient

State Street  Short Precious

Good diversification

The 3 months correlation between State and Short is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and Short Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Precious Metals 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 Short Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Precious Metals has no effect on the direction of State Street i.e., State Street and Short Precious go up and down completely randomly.

Pair Corralation between State Street and Short Precious

Assuming the 90 days horizon State Street Target is expected to generate 0.31 times more return on investment than Short Precious. However, State Street Target is 3.19 times less risky than Short Precious. It trades about -0.04 of its potential returns per unit of risk. Short Precious Metals is currently generating about -0.23 per unit of risk. If you would invest  1,091  in State Street Target on December 19, 2024 and sell it today you would lose (17.00) from holding State Street Target or give up 1.56% of portfolio value over 90 days.

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

State Street Target  vs.  Short Precious Metals

State Street Target

Risk-Adjusted Performance

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 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.

Short Precious Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Short Precious Metals 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 Short Precious

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

The idea behind State Street Target and Short Precious Metals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.