Correlation Between State Street and Marshfield Concentrated

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

By analyzing existing cross correlation between State Street Equity and Marshfield Centrated Opportunity, you can compare the effects of market volatilities on State Street and Marshfield Concentrated 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 Marshfield Concentrated. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Marshfield Concentrated.

Diversification Opportunities for State Street and Marshfield Concentrated

0.74

Correlation Coefficient

State Street  Marshfield Concentrated

Poor diversification

The 3 months correlation between State and Marshfield is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding State Street Equity and Marshfield Centrated Opportuni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marshfield Concentrated 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 Equity are associated (or correlated) with Marshfield Concentrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marshfield Concentrated has no effect on the direction of State Street i.e., State Street and Marshfield Concentrated go up and down completely randomly.

Pair Corralation between State Street and Marshfield Concentrated

Assuming the 90 days horizon State Street Equity is expected to generate 1.29 times more return on investment than Marshfield Concentrated. However, State Street is 1.29 times more volatile than Marshfield Centrated Opportunity. It trades about 0.11 of its potential returns per unit of risk. Marshfield Centrated Opportunity is currently generating about 0.08 per unit of risk. If you would invest  43,270  in State Street Equity on October 2, 2024 and sell it today you would earn a total of  9,866  from holding State Street Equity or generate 22.8% return on investment over 90 days.

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

State Street Equity  vs.  Marshfield Centrated Opportuni

State Street Equity

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Equity are ranked lower than 2 (%) 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.

Marshfield Concentrated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marshfield Centrated Opportunity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Marshfield Concentrated is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with State Street and Marshfield Concentrated

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

The idea behind State Street Equity and Marshfield Centrated Opportunity 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.