Correlation Between Vanguard Total and State Street

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

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

Diversification Opportunities for Vanguard Total and State Street

1.0

Correlation Coefficient

Vanguard Total  State Street

No risk reduction

The 3 months correlation between Vanguard and State is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and State Street Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Income and Vanguard Total 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 Vanguard Total Bond 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 Income has no effect on the direction of Vanguard Total i.e., Vanguard Total and State Street go up and down completely randomly.

Pair Corralation between Vanguard Total and State Street

Assuming the 90 days horizon Vanguard Total is expected to generate 1.13 times less return on investment than State Street. But when comparing it to its historical volatility, Vanguard Total Bond is 1.1 times less risky than State Street. It trades about 0.16 of its potential returns per unit of risk. State Street Income is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  952.00  in State Street Income on December 21, 2024 and sell it today you would earn a total of  31.00  from holding State Street Income or generate 3.26% return on investment over 90 days.

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

Vanguard Total Bond  vs.  State Street Income

Vanguard Total Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Bond are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

State Street Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Income are ranked lower than 12 (%) of all funds and portfolios of funds 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.

Pair Trading with Vanguard Total and State Street

The main advantage of trading using opposite Vanguard Total and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Vanguard Total Bond and State Street Income 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.