Correlation Between State Street and Chicago Atlantic

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

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

Diversification Opportunities for State Street and Chicago Atlantic

-0.05

Correlation Coefficient

State Street  Chicago Atlantic

Good diversification

The 3 months correlation between State and Chicago is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Chicago Atlantic BDC, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicago Atlantic BDC, 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 Chicago Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicago Atlantic BDC, has no effect on the direction of State Street i.e., State Street and Chicago Atlantic go up and down completely randomly.

Pair Corralation between State Street and Chicago Atlantic

Assuming the 90 days trading horizon State Street is expected to generate 0.58 times more return on investment than Chicago Atlantic. However, State Street is 1.73 times less risky than Chicago Atlantic. It trades about -0.2 of its potential returns per unit of risk. Chicago Atlantic BDC, is currently generating about -0.12 per unit of risk. If you would invest  2,432  in State Street on September 22, 2024 and sell it today you would lose (63.00) from holding State Street or give up 2.59% of portfolio value over 90 days.

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

State Street  vs.  Chicago Atlantic BDC,

State Street

Risk-Adjusted Performance

0 of 100

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.

Chicago Atlantic BDC,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chicago Atlantic BDC, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Chicago Atlantic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with State Street and Chicago Atlantic

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

The idea behind State Street and Chicago Atlantic BDC, 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.