Correlation Between Pace Large and State Street
Can any of the company-specific risk be diversified away by investing in both Pace Large 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 Pace Large and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace Large Value and State Street Aggregate, you can compare the effects of market volatilities on Pace Large 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 Pace Large with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Large and State Street.
Diversification Opportunities for Pace Large and State Street
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Pace and State is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Value and State Street Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Aggregate and Pace Large 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 Pace Large Value 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 Aggregate has no effect on the direction of Pace Large i.e., Pace Large and State Street go up and down completely randomly.
Pair Corralation between Pace Large and State Street
Assuming the 90 days horizon Pace Large Value is expected to generate 2.11 times more return on investment than State Street. However, Pace Large is 2.11 times more volatile than State Street Aggregate. It trades about 0.3 of its potential returns per unit of risk. State Street Aggregate is currently generating about 0.13 per unit of risk. If you would invest 2,228 in Pace Large Value on September 1, 2024 and sell it today you would earn a total of 114.00 from holding Pace Large Value or generate 5.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Pace Large Value vs. State Street Aggregate
Performance |
| Timeline |
| Pace Large Value |
| State Street Aggregate |
Pace Large and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Large and State Street
The main advantage of trading using opposite Pace Large and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Large 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.| Pace Large vs. Principal Lifetime Hybrid | Pace Large vs. Touchstone Large Cap | Pace Large vs. Tax Managed Large Cap | Pace Large vs. Federated Kaufmann Large |
| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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