Correlation Between State Street and Grupo Carso

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

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

Diversification Opportunities for State Street and Grupo Carso

-0.13

Correlation Coefficient

State Street  Grupo Carso

Good diversification

The 3 months correlation between State and Grupo is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Grupo Carso SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Carso SAB 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 Grupo Carso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Carso SAB has no effect on the direction of State Street i.e., State Street and Grupo Carso go up and down completely randomly.

Pair Corralation between State Street and Grupo Carso

Assuming the 90 days trading horizon State Street is expected to generate 0.99 times more return on investment than Grupo Carso. However, State Street is 1.01 times less risky than Grupo Carso. It trades about 0.16 of its potential returns per unit of risk. Grupo Carso SAB is currently generating about 0.01 per unit of risk. If you would invest  143,027  in State Street on December 5, 2024 and sell it today you would earn a total of  57,394  from holding State Street or generate 40.13% return on investment over 90 days.

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

State Street  vs.  Grupo Carso SAB

State Street

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grupo Carso SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grupo Carso is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with State Street and Grupo Carso

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

The idea behind State Street and Grupo Carso SAB 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.