Correlation Between State Street and Atlas Corp

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

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

Diversification Opportunities for State Street and Atlas Corp

0.36

Correlation Coefficient

State Street  Atlas Corp

Weak diversification

The 3 months correlation between State and Atlas is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Atlas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Corp 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 are associated (or correlated) with Atlas Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Corp has no effect on the direction of State Street i.e., State Street and Atlas Corp go up and down completely randomly.

Pair Corralation between State Street and Atlas Corp

Assuming the 90 days trading horizon State Street is expected to under-perform the Atlas Corp. In addition to that, State Street is 1.45 times more volatile than Atlas Corp. It trades about -0.01 of its total potential returns per unit of risk. Atlas Corp is currently generating about 0.07 per unit of volatility. If you would invest  2,447  in Atlas Corp on December 30, 2024 and sell it today you would earn a total of  55.00  from holding Atlas Corp or generate 2.25% return on investment over 90 days.

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

State Street  vs.  Atlas Corp

State Street

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Atlas Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Atlas Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with State Street and Atlas Corp

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

The idea behind State Street and Atlas Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.