Correlation Between NYSE Composite and State Street
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and State Street Smallmid, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and State Street.
Diversification Opportunities for NYSE Composite and State Street
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and State is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and State Street go up and down completely randomly.
Pair Corralation between NYSE Composite and State Street
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.39 times less return on investment than State Street. But when comparing it to its historical volatility, NYSE Composite is 1.68 times less risky than State Street. It trades about 0.14 of its potential returns per unit of risk. State Street Smallmid is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 24,423 in State Street Smallmid on August 25, 2024 and sell it today you would earn a total of 11,184 from holding State Street Smallmid or generate 45.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. State Street Smallmid
Performance |
| Timeline |
NYSE Composite and State Street Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
State Street Smallmid
Pair trading matchups for State Street
Pair Trading with NYSE Composite and State Street
The main advantage of trading using opposite NYSE Composite and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Awilco Drilling PLC | NYSE Composite vs. AKITA Drilling | NYSE Composite vs. SunOpta | NYSE Composite vs. Delek Drilling |
| State Street vs. Vanguard Small Cap Index | State Street vs. Vanguard 500 Index | State Street vs. Vanguard Growth Index | State Street vs. Vanguard Total International |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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