Correlation Between Pace High and State Street
Can any of the company-specific risk be diversified away by investing in both Pace High 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 High 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 High Yield and State Street Hedged, you can compare the effects of market volatilities on Pace High 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 High with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace High and State Street.
Diversification Opportunities for Pace High and State Street
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pace and State is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Pace High Yield and State Street Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Hedged and Pace High 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 High Yield 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 Hedged has no effect on the direction of Pace High i.e., Pace High and State Street go up and down completely randomly.
Pair Corralation between Pace High and State Street
Assuming the 90 days horizon Pace High is expected to generate 1.62 times less return on investment than State Street. But when comparing it to its historical volatility, Pace High Yield is 5.23 times less risky than State Street. It trades about 0.43 of its potential returns per unit of risk. State Street Hedged is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 12,306 in State Street Hedged on September 4, 2024 and sell it today you would earn a total of 185.00 from holding State Street Hedged or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Pace High Yield vs. State Street Hedged
Performance |
| Timeline |
| Pace High Yield |
| State Street Hedged |
Pace High and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace High and State Street
The main advantage of trading using opposite Pace High and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace High 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 High vs. Pace International Equity | Pace High vs. Pace International Equity | Pace High vs. Ubs Allocation Fund | Pace High vs. Ubs Allocation Fund |
| State Street vs. Vanguard Financials Index | State Street vs. Angel Oak Financial | State Street vs. Fidelity Advisor Financial | State Street vs. Davis Financial Fund |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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