Correlation Between Main Street and State Street
Can any of the company-specific risk be diversified away by investing in both Main Street 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 Main Street and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Main Street Capital and State Street Corp, you can compare the effects of market volatilities on Main Street 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 Main Street with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and State Street.
Diversification Opportunities for Main Street and State Street
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Main and State is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital 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 Main Street 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 Main Street Capital 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 Main Street i.e., Main Street and State Street go up and down completely randomly.
Pair Corralation between Main Street and State Street
Given the investment horizon of 90 days Main Street is expected to generate 1.2 times less return on investment than State Street. But when comparing it to its historical volatility, Main Street Capital is 1.46 times less risky than State Street. It trades about 0.27 of its potential returns per unit of risk. State Street Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 9,298 in State Street Corp on August 28, 2024 and sell it today you would earn a total of 581.00 from holding State Street Corp or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Main Street Capital vs. State Street Corp
Performance |
| Timeline |
| Main Street Capital |
| State Street Corp |
Main Street and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and State Street
The main advantage of trading using opposite Main Street and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street 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.| Main Street vs. Gladstone Capital | Main Street vs. PennantPark Floating Rate | Main Street vs. Horizon Technology Finance | Main Street vs. Prospect Capital |
| 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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