Correlation Between European Equity and State Street
Can any of the company-specific risk be diversified away by investing in both European Equity 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 European Equity and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Equity Closed and State Street Corp, you can compare the effects of market volatilities on European Equity 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 European Equity with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Equity and State Street.
Diversification Opportunities for European Equity and State Street
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between European and State is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding European Equity Closed and State Street Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Corp and European Equity 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 European Equity Closed 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 Corp has no effect on the direction of European Equity i.e., European Equity and State Street go up and down completely randomly.
Pair Corralation between European Equity and State Street
Considering the 90-day investment horizon European Equity Closed is expected to under-perform the State Street. But the fund apears to be less risky and, when comparing its historical volatility, European Equity Closed is 1.57 times less risky than State Street. The fund trades about -0.24 of its potential returns per unit of risk. The State Street Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 9,293 in State Street Corp on August 31, 2024 and sell it today you would earn a total of 586.00 from holding State Street Corp or generate 6.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
European Equity Closed vs. State Street Corp
Performance |
| Timeline |
| European Equity Closed |
| State Street Corp |
European Equity and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Equity and State Street
The main advantage of trading using opposite European Equity and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Equity 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.| European Equity vs. XAI Octagon Floating | European Equity vs. MFS Charter Income | European Equity vs. Nuveen New York | European Equity vs. Invesco High Income |
| State Street vs. Northern Trust | State Street vs. Franklin Resources | State Street vs. Invesco Plc | State Street vs. T Rowe Price |
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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