Correlation Between Fundamental Large and State Street

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

By analyzing existing cross correlation between Fundamental Large Cap and State Street Core, you can compare the effects of market volatilities on Fundamental Large and State Street 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 Fundamental Large with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundamental Large and State Street.

Diversification Opportunities for Fundamental Large and State Street

0.78

Correlation Coefficient

Fundamental Large  State Street

Poor diversification

The 3 months correlation between Fundamental and State is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and State Street Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Core and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Core has no effect on the direction of Fundamental Large i.e., Fundamental Large and State Street go up and down completely randomly.

Pair Corralation between Fundamental Large and State Street

Assuming the 90 days horizon Fundamental Large Cap is expected to generate 0.41 times more return on investment than State Street. However, Fundamental Large Cap is 2.45 times less risky than State Street. It trades about -0.09 of its potential returns per unit of risk. State Street Core is currently generating about -0.13 per unit of risk. If you would invest  6,765  in Fundamental Large Cap on December 22, 2024 and sell it today you would lose (394.00) from holding Fundamental Large Cap or give up 5.82% of portfolio value over 90 days.

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

Fundamental Large Cap  vs.  State Street Core

Fundamental Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fundamental Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fundamental Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

State Street Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Fundamental Large and State Street

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

The idea behind Fundamental Large Cap and State Street Core 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.