Correlation Between Tax-managed and State Street
Can any of the company-specific risk be diversified away by investing in both Tax-managed 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 Tax-managed and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tax Managed Large Cap and State Street Target, you can compare the effects of market volatilities on Tax-managed 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 Tax-managed with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax-managed and State Street.
Diversification Opportunities for Tax-managed and State Street
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tax-managed and State is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed Large Cap and State Street Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Target and Tax-managed 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 Tax Managed Large Cap 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 Target has no effect on the direction of Tax-managed i.e., Tax-managed and State Street go up and down completely randomly.
Pair Corralation between Tax-managed and State Street
Assuming the 90 days horizon Tax Managed Large Cap is expected to generate 2.68 times more return on investment than State Street. However, Tax-managed is 2.68 times more volatile than State Street Target. It trades about 0.33 of its potential returns per unit of risk. State Street Target is currently generating about 0.32 per unit of risk. If you would invest 8,340 in Tax Managed Large Cap on September 2, 2024 and sell it today you would earn a total of 439.00 from holding Tax Managed Large Cap or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tax Managed Large Cap vs. State Street Target
Performance |
| Timeline |
| Tax Managed Large |
| State Street Target |
Tax-managed and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tax-managed and State Street
The main advantage of trading using opposite Tax-managed and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax-managed 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.| Tax-managed vs. Valic Company I | Tax-managed vs. Blackrock High Yield | Tax-managed vs. Western Asset High | Tax-managed vs. Virtus High Yield |
| State Street vs. Large Cap Growth Profund | State Street vs. T Rowe Price | State Street vs. Aqr Large Cap | State Street vs. Tax Managed Large Cap |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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