Correlation Between Large Cap and State Street
Can any of the company-specific risk be diversified away by investing in both Large Cap 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 Large Cap and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Large Cap Growth Profund and State Street Target, you can compare the effects of market volatilities on Large Cap 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 Large Cap with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and State Street.
Diversification Opportunities for Large Cap and State Street
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Large and State is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Growth Profund 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 Large Cap 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 Large Cap Growth Profund 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 Large Cap i.e., Large Cap and State Street go up and down completely randomly.
Pair Corralation between Large Cap and State Street
Assuming the 90 days horizon Large Cap Growth Profund is expected to generate 3.34 times more return on investment than State Street. However, Large Cap is 3.34 times more volatile than State Street Target. It trades about 0.25 of its potential returns per unit of risk. State Street Target is currently generating about 0.32 per unit of risk. If you would invest 4,304 in Large Cap Growth Profund on September 2, 2024 and sell it today you would earn a total of 217.00 from holding Large Cap Growth Profund or generate 5.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Cap Growth Profund vs. State Street Target
Performance |
| Timeline |
| Large Cap Growth |
| State Street Target |
Large Cap and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and State Street
The main advantage of trading using opposite Large Cap and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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.| Large Cap vs. Short Real Estate | Large Cap vs. Ultrashort Mid Cap Profund | Large Cap vs. Technology Ultrasector Profund | Large Cap vs. Technology Ultrasector Profund |
| State Street vs. Large Cap Growth Profund | State Street vs. T Rowe Price | State Street vs. Aqr Large Cap | State Street vs. Tax Managed Large Cap |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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