Correlation Between State Street and Ameriprise Financial

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

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

Diversification Opportunities for State Street and Ameriprise Financial

0.89

Correlation Coefficient

State Street  Ameriprise Financial

Very poor diversification

The 3 months correlation between State and Ameriprise is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise 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 Corp are associated (or correlated) with Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of State Street i.e., State Street and Ameriprise Financial go up and down completely randomly.

Pair Corralation between State Street and Ameriprise Financial

Considering the 90-day investment horizon State Street Corp is expected to under-perform the Ameriprise Financial. But the stock apears to be less risky and, when comparing its historical volatility, State Street Corp is 1.02 times less risky than Ameriprise Financial. The stock trades about -0.08 of its potential returns per unit of risk. The Ameriprise Financial is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  52,908  in Ameriprise Financial on December 29, 2024 and sell it today you would lose (3,024) from holding Ameriprise Financial or give up 5.72% of portfolio value over 90 days.

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

State Street Corp  vs.  Ameriprise Financial

State Street Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Ameriprise Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ameriprise Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Ameriprise Financial is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with State Street and Ameriprise Financial

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

The idea behind State Street Corp and Ameriprise 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 Stocks Directory module to find actively traded stocks across global markets.