Correlation Between Absolute Convertible and State Street
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible 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 Absolute Convertible and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and State Street Target, you can compare the effects of market volatilities on Absolute Convertible 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 Absolute Convertible with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and State Street.
Diversification Opportunities for Absolute Convertible and State Street
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Absolute and State is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target and Absolute Convertible 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 Absolute Convertible Arbitrage 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 Target has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and State Street go up and down completely randomly.
Pair Corralation between Absolute Convertible and State Street
Assuming the 90 days horizon Absolute Convertible is expected to generate 2.86 times less return on investment than State Street. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 10.77 times less risky than State Street. It trades about 0.37 of its potential returns per unit of risk. State Street Target is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,193 in State Street Target on September 12, 2024 and sell it today you would earn a total of 468.00 from holding State Street Target or generate 39.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. State Street Target
Performance |
| Timeline |
| Absolute Convertible |
| State Street Target |
Absolute Convertible and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and State Street
The main advantage of trading using opposite Absolute Convertible and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible 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.| Absolute Convertible vs. Vy Goldman Sachs | Absolute Convertible vs. Invesco Gold Special | Absolute Convertible vs. Short Precious Metals | Absolute Convertible vs. Franklin Gold Precious |
| State Street vs. Allianzgi Convertible Income | State Street vs. Putnam Convertible Incm Gwth | State Street vs. Absolute Convertible Arbitrage | State Street vs. Advent Claymore Convertible |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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