Correlation Between State Street and State Street

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

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

Diversification Opportunities for State Street and State Street

-0.58

Correlation Coefficient

State Street  State Street

Excellent diversification

The 3 months correlation between State and State is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding State Street Aggregate and State Street Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Smallmid 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 Aggregate are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Smallmid has no effect on the direction of State Street i.e., State Street and State Street go up and down completely randomly.

Pair Corralation between State Street and State Street

Assuming the 90 days horizon State Street Aggregate is expected to under-perform the State Street. But the mutual fund apears to be less risky and, when comparing its historical volatility, State Street Aggregate is 3.27 times less risky than State Street. The mutual fund trades about -0.17 of its potential returns per unit of risk. The State Street Smallmid is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  31,210  in State Street Smallmid on September 14, 2024 and sell it today you would earn a total of  3,930  from holding State Street Smallmid or generate 12.59% return on investment over 90 days.

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

State Street Aggregate  vs.  State Street Smallmid

State Street Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Street Aggregate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong 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.

State Street Smallmid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Smallmid are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, State Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with State Street and State Street

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

The idea behind State Street Aggregate and State Street Smallmid 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .