Correlation Between State Street and Great West

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

Diversification Opportunities for State Street and Great West

0.01

Correlation Coefficient

State Street  Great West

Significant diversification

The 3 months correlation between State and Great is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and Great West Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Goldman 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Goldman has no effect on the direction of State Street i.e., State Street and Great West go up and down completely randomly.

Pair Corralation between State Street and Great West

Assuming the 90 days horizon State Street Target is expected to generate 0.37 times more return on investment than Great West. However, State Street Target is 2.71 times less risky than Great West. It trades about 0.01 of its potential returns per unit of risk. Great West Goldman Sachs is currently generating about -0.13 per unit of risk. If you would invest  1,496  in State Street Target on December 27, 2024 and sell it today you would earn a total of  7.00  from holding State Street Target or generate 0.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

State Street Target  vs.  Great West Goldman Sachs

State Street Target

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Target are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Great West Goldman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great West Goldman Sachs 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-looking 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 Great West

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

The idea behind State Street Target and Great West Goldman Sachs 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.