Correlation Between State Street and Grupo Sports

Can any of the company-specific risk be diversified away by investing in both State Street and Grupo Sports 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 Sports 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 Sports World, you can compare the effects of market volatilities on State Street and Grupo Sports 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 Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Grupo Sports.

Diversification Opportunities for State Street and Grupo Sports

0.56

Correlation Coefficient

State Street  Grupo Sports

Very weak diversification

The 3 months correlation between State and Grupo is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Grupo Sports World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Sports World 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 Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Sports World has no effect on the direction of State Street i.e., State Street and Grupo Sports go up and down completely randomly.

Pair Corralation between State Street and Grupo Sports

Assuming the 90 days trading horizon State Street is expected to generate 0.94 times more return on investment than Grupo Sports. However, State Street is 1.07 times less risky than Grupo Sports. It trades about 0.15 of its potential returns per unit of risk. Grupo Sports World is currently generating about 0.14 per unit of risk. If you would invest  171,447  in State Street on October 9, 2024 and sell it today you would earn a total of  28,974  from holding State Street or generate 16.9% return on investment over 90 days.

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

State Street  vs.  Grupo Sports World

State Street

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, State Street showed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Sports World

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Sports World are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Grupo Sports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Street and Grupo Sports

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

The idea behind State Street and Grupo Sports World 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.