Correlation Between SCE Trust and State Street
Can any of the company-specific risk be diversified away by investing in both SCE Trust 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 SCE Trust and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCE Trust III and State Street, you can compare the effects of market volatilities on SCE Trust 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 SCE Trust with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCE Trust and State Street.
Diversification Opportunities for SCE Trust and State Street
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between SCE and State is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding SCE Trust III and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street and SCE Trust 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 SCE Trust III 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 has no effect on the direction of SCE Trust i.e., SCE Trust and State Street go up and down completely randomly.
Pair Corralation between SCE Trust and State Street
Assuming the 90 days trading horizon SCE Trust is expected to generate 3.0 times less return on investment than State Street. But when comparing it to its historical volatility, SCE Trust III is 15.26 times less risky than State Street. It trades about 0.5 of its potential returns per unit of risk. State Street is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,477 in State Street on September 2, 2024 and sell it today you would earn a total of 30.00 from holding State Street or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
SCE Trust III vs. State Street
Performance |
| Timeline |
| SCE Trust III |
| State Street |
SCE Trust and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SCE Trust and State Street
The main advantage of trading using opposite SCE Trust and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCE Trust 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.| SCE Trust vs. SCE Trust IV | SCE Trust vs. SCE Trust V | SCE Trust vs. SCE Trust II | SCE Trust vs. SCE Trust VI |
| State Street vs. The Gabelli Equity | State Street vs. The Gabelli Multimedia | State Street vs. The Gabelli Equity | State Street vs. Virtus AllianzGI Convertible |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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