Correlation Between Quantitative Longshort and State Street
Can any of the company-specific risk be diversified away by investing in both Quantitative Longshort 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 Quantitative Longshort and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quantitative Longshort Equity and State Street Target, you can compare the effects of market volatilities on Quantitative Longshort 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 Quantitative Longshort with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quantitative Longshort and State Street.
Diversification Opportunities for Quantitative Longshort and State Street
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Quantitative and State is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative Longshort Equity 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 Quantitative Longshort 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 Quantitative Longshort Equity 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 Quantitative Longshort i.e., Quantitative Longshort and State Street go up and down completely randomly.
Pair Corralation between Quantitative Longshort and State Street
Assuming the 90 days horizon Quantitative Longshort is expected to generate 1.07 times less return on investment than State Street. But when comparing it to its historical volatility, Quantitative Longshort Equity is 1.0 times less risky than State Street. It trades about 0.3 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 1,547 in State Street Target on September 1, 2024 and sell it today you would earn a total of 61.00 from holding State Street Target or generate 3.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Quantitative Longshort Equity vs. State Street Target
Performance |
| Timeline |
| Quantitative Longshort |
| State Street Target |
Quantitative Longshort and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quantitative Longshort and State Street
The main advantage of trading using opposite Quantitative Longshort and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantitative Longshort 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.| Quantitative Longshort vs. Metropolitan West High | Quantitative Longshort vs. Pioneer High Yield | Quantitative Longshort vs. Western Asset High | Quantitative Longshort vs. Franklin High Income |
| State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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