Correlation Between Rational Defensive and State Street
Can any of the company-specific risk be diversified away by investing in both Rational Defensive 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 Rational Defensive and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rational Defensive Growth and State Street Smallmid, you can compare the effects of market volatilities on Rational Defensive 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 Rational Defensive with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and State Street.
Diversification Opportunities for Rational Defensive and State Street
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Rational and State is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and State Street Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Smallmid and Rational Defensive 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 Rational Defensive Growth 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 Smallmid has no effect on the direction of Rational Defensive i.e., Rational Defensive and State Street go up and down completely randomly.
Pair Corralation between Rational Defensive and State Street
Assuming the 90 days horizon Rational Defensive is expected to generate 1.1 times less return on investment than State Street. But when comparing it to its historical volatility, Rational Defensive Growth is 1.14 times less risky than State Street. It trades about 0.15 of its potential returns per unit of risk. State Street Smallmid is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 22,983 in State Street Smallmid on August 25, 2024 and sell it today you would earn a total of 12,624 from holding State Street Smallmid or generate 54.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Rational Defensive Growth vs. State Street Smallmid
Performance |
| Timeline |
| Rational Defensive Growth |
| State Street Smallmid |
Rational Defensive and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rational Defensive and State Street
The main advantage of trading using opposite Rational Defensive and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive 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.| Rational Defensive vs. Nuveen High Yield | Rational Defensive vs. Pioneer High Income | Rational Defensive vs. Victory High Income | Rational Defensive vs. Siit High Yield |
| State Street vs. L Abbett Growth | State Street vs. Rational Defensive Growth | State Street vs. Pioneer Fundamental Growth | State Street vs. Pace Smallmedium Growth |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |