Correlation Between State Street and AGF Management

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

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

Diversification Opportunities for State Street and AGF Management

0.78

Correlation Coefficient

State Street  AGF Management

Poor diversification

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

Pair Corralation between State Street and AGF Management

Assuming the 90 days horizon State Street is expected to under-perform the AGF Management. But the stock apears to be less risky and, when comparing its historical volatility, State Street is 1.42 times less risky than AGF Management. The stock trades about -0.08 of its potential returns per unit of risk. The AGF Management Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  684.00  in AGF Management Limited on December 28, 2024 and sell it today you would lose (29.00) from holding AGF Management Limited or give up 4.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

State Street  vs.  AGF Management Limited

State Street

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AGF Management

Risk-Adjusted Performance

Very Weak

Over the last 90 days AGF Management Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AGF Management is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with State Street and AGF Management

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

The idea behind State Street and AGF Management Limited 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.