Correlation Between Barings Emerging and State Street
Can any of the company-specific risk be diversified away by investing in both Barings Emerging 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 Barings Emerging and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings Emerging Markets and State Street Target, you can compare the effects of market volatilities on Barings Emerging 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 Barings Emerging with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Emerging and State Street.
Diversification Opportunities for Barings Emerging and State Street
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barings and State is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Barings Emerging Markets 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 Barings Emerging 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 Barings Emerging Markets 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 Barings Emerging i.e., Barings Emerging and State Street go up and down completely randomly.
Pair Corralation between Barings Emerging and State Street
Assuming the 90 days horizon Barings Emerging is expected to generate 18.99 times less return on investment than State Street. But when comparing it to its historical volatility, Barings Emerging Markets is 1.25 times less risky than State Street. It trades about 0.02 of its potential returns per unit of risk. State Street Target is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,363 in State Street Target on September 1, 2024 and sell it today you would earn a total of 39.00 from holding State Street Target or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Barings Emerging Markets vs. State Street Target
Performance |
| Timeline |
| Barings Emerging Markets |
| State Street Target |
Barings Emerging and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings Emerging and State Street
The main advantage of trading using opposite Barings Emerging and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Emerging 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.| Barings Emerging vs. Artisan High Income | Barings Emerging vs. Federated Ohio Municipal | Barings Emerging vs. Versatile Bond Portfolio | Barings Emerging vs. Ambrus Core Bond |
| State Street vs. Franklin Lifesmart Retirement | State Street vs. Pro Blend Moderate Term | State Street vs. Target Retirement 2040 | State Street vs. Transamerica Cleartrack Retirement |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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