Correlation Between T Rowe and State Street

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

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

Diversification Opportunities for T Rowe and State Street

0.83

Correlation Coefficient

T Rowe  State Street

Very poor diversification

The 3 months correlation between TROW and State is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Corp and T Rowe 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 T Rowe Price 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 Corp has no effect on the direction of T Rowe i.e., T Rowe and State Street go up and down completely randomly.

Pair Corralation between T Rowe and State Street

Given the investment horizon of 90 days T Rowe Price is expected to under-perform the State Street. But the stock apears to be less risky and, when comparing its historical volatility, T Rowe Price is 1.09 times less risky than State Street. The stock trades about -0.2 of its potential returns per unit of risk. The State Street Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  9,782  in State Street Corp on December 27, 2024 and sell it today you would lose (517.00) from holding State Street Corp or give up 5.29% of portfolio value over 90 days.

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

T Rowe Price  vs.  State Street Corp

T Rowe Price

Risk-Adjusted Performance

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 comparatively stable basic indicators, State Street is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with T Rowe and State Street

The main advantage of trading using opposite T Rowe and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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 T Rowe Price and State Street Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.