Correlation Between State Street and TRAINLINE PLC
Can any of the company-specific risk be diversified away by investing in both State Street and TRAINLINE PLC 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 TRAINLINE PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street and TRAINLINE PLC LS, you can compare the effects of market volatilities on State Street and TRAINLINE PLC 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 TRAINLINE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and TRAINLINE PLC.
Diversification Opportunities for State Street and TRAINLINE PLC
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and TRAINLINE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding State Street and TRAINLINE PLC LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAINLINE PLC LS 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 TRAINLINE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAINLINE PLC LS has no effect on the direction of State Street i.e., State Street and TRAINLINE PLC go up and down completely randomly.
Pair Corralation between State Street and TRAINLINE PLC
Assuming the 90 days horizon State Street is expected to generate 0.43 times more return on investment than TRAINLINE PLC. However, State Street is 2.33 times less risky than TRAINLINE PLC. It trades about -0.07 of its potential returns per unit of risk. TRAINLINE PLC LS is currently generating about -0.16 per unit of risk. If you would invest 9,327 in State Street on December 29, 2024 and sell it today you would lose (726.00) from holding State Street or give up 7.78% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.44% |
Values | Daily Returns |
State Street vs. TRAINLINE PLC LS
Performance |
Timeline |
State Street |
TRAINLINE PLC LS |
State Street and TRAINLINE PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with State Street and TRAINLINE PLC
The main advantage of trading using opposite State Street and TRAINLINE PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, TRAINLINE PLC 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 TRAINLINE PLC will offset losses from the drop in TRAINLINE PLC's long position.State Street vs. TAL Education Group | State Street vs. MOVIE GAMES SA | State Street vs. TROPHY GAMES DEV | State Street vs. HOCHSCHILD MINING |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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