Correlation Between State Street and Vanguard Information

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

Diversification Opportunities for State Street and Vanguard Information

0.98

Correlation Coefficient

State Street  Vanguard Information

Almost no diversification

The 3 months correlation between State and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding State Street Equity and Vanguard Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Information 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 Vanguard Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Information has no effect on the direction of State Street i.e., State Street and Vanguard Information go up and down completely randomly.

Pair Corralation between State Street and Vanguard Information

Assuming the 90 days horizon State Street is expected to generate 2.41 times less return on investment than Vanguard Information. But when comparing it to its historical volatility, State Street Equity is 2.2 times less risky than Vanguard Information. It trades about 0.12 of its potential returns per unit of risk. Vanguard Information Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  31,740  in Vanguard Information Technology on September 14, 2024 and sell it today you would earn a total of  889.00  from holding Vanguard Information Technology or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

State Street Equity  vs.  Vanguard Information Technolog

State Street Equity

Risk-Adjusted Performance

14 of 100

Good

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

Vanguard Information

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Information Technology are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Information may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with State Street and Vanguard Information

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

The idea behind State Street Equity and Vanguard Information Technology 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.