Correlation Between State Street and Kayne Anderson

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

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

Diversification Opportunities for State Street and Kayne Anderson

0.33

Correlation Coefficient

State Street  Kayne Anderson

Weak diversification

The 3 months correlation between State and Kayne is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Kayne Anderson MLP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kayne Anderson MLP 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 Kayne Anderson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kayne Anderson MLP has no effect on the direction of State Street i.e., State Street and Kayne Anderson go up and down completely randomly.

Pair Corralation between State Street and Kayne Anderson

Assuming the 90 days trading horizon State Street is expected to generate 16.88 times less return on investment than Kayne Anderson. But when comparing it to its historical volatility, State Street is 1.77 times less risky than Kayne Anderson. It trades about 0.01 of its potential returns per unit of risk. Kayne Anderson MLP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,235  in Kayne Anderson MLP on December 28, 2024 and sell it today you would earn a total of  47.00  from holding Kayne Anderson MLP or generate 3.81% 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.  Kayne Anderson MLP

State Street

Risk-Adjusted Performance

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.

Kayne Anderson MLP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kayne Anderson MLP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Kayne Anderson is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with State Street and Kayne Anderson

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

The idea behind State Street and Kayne Anderson MLP 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.