Correlation Between State Street and B Riley

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

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

Diversification Opportunities for State Street and B Riley

0.23

Correlation Coefficient

State Street  B Riley

Modest diversification

The 3 months correlation between State and RILY is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding State Street and B Riley Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B Riley Financial 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 B Riley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B Riley Financial has no effect on the direction of State Street i.e., State Street and B Riley go up and down completely randomly.

Pair Corralation between State Street and B Riley

Assuming the 90 days trading horizon State Street is expected to generate 0.11 times more return on investment than B Riley. However, State Street is 8.78 times less risky than B Riley. It trades about 0.03 of its potential returns per unit of risk. B Riley Financial is currently generating about -0.02 per unit of risk. If you would invest  2,125  in State Street on September 23, 2024 and sell it today you would earn a total of  244.00  from holding State Street or generate 11.48% 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.  B Riley Financial

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

B Riley Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days B Riley Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, B Riley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with State Street and B Riley

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

The idea behind State Street and B Riley Financial 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.