Correlation Between Cref Inflation-linked and State Street
Can any of the company-specific risk be diversified away by investing in both Cref Inflation-linked 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 Cref Inflation-linked and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cref Inflation Linked Bond and State Street Smallmid, you can compare the effects of market volatilities on Cref Inflation-linked 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 Cref Inflation-linked with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cref Inflation-linked and State Street.
Diversification Opportunities for Cref Inflation-linked and State Street
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CREF and State is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond 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 Cref Inflation-linked 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 Cref Inflation Linked Bond 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 Cref Inflation-linked i.e., Cref Inflation-linked and State Street go up and down completely randomly.
Pair Corralation between Cref Inflation-linked and State Street
Assuming the 90 days trading horizon Cref Inflation-linked is expected to generate 7.47 times less return on investment than State Street. But when comparing it to its historical volatility, Cref Inflation Linked Bond is 6.21 times less risky than State Street. It trades about 0.12 of its potential returns per unit of risk. State Street Smallmid is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 27,286 in State Street Smallmid on September 3, 2024 and sell it today you would earn a total of 5,923 from holding State Street Smallmid or generate 21.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cref Inflation Linked Bond vs. State Street Smallmid
Performance |
| Timeline |
| Cref Inflation Linked |
| State Street Smallmid |
Cref Inflation-linked and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cref Inflation-linked and State Street
The main advantage of trading using opposite Cref Inflation-linked and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cref Inflation-linked 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.The idea behind Cref Inflation Linked Bond and State Street Smallmid pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| State Street vs. Cref Inflation Linked Bond | State Street vs. Blackrock Inflation Protected | State Street vs. Goldman Sachs Managed | 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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