Correlation Between Energy Basic and State Street
Can any of the company-specific risk be diversified away by investing in both Energy Basic 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 Energy Basic and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Basic Materials and State Street Target, you can compare the effects of market volatilities on Energy Basic 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 Energy Basic with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and State Street.
Diversification Opportunities for Energy Basic and State Street
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Energy and State is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials 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 Energy Basic 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 Energy Basic Materials 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 Energy Basic i.e., Energy Basic and State Street go up and down completely randomly.
Pair Corralation between Energy Basic and State Street
Assuming the 90 days horizon Energy Basic Materials is expected to under-perform the State Street. In addition to that, Energy Basic is 2.83 times more volatile than State Street Target. It trades about -0.01 of its total potential returns per unit of risk. State Street Target is currently generating about 0.12 per unit of volatility. If you would invest 1,058 in State Street Target on September 14, 2024 and sell it today you would earn a total of 104.00 from holding State Street Target or generate 9.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Basic Materials vs. State Street Target
Performance |
| Timeline |
| Energy Basic Materials |
| State Street Target |
Energy Basic and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Basic and State Street
The main advantage of trading using opposite Energy Basic and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Basic 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.| Energy Basic vs. Chestnut Street Exchange | Energy Basic vs. The Gabelli Money | Energy Basic vs. Blackrock Exchange Portfolio | Energy Basic vs. Edward Jones Money |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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