Correlation Between State Street and Hodges Blue
Can any of the company-specific risk be diversified away by investing in both State Street and Hodges Blue 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 State Street and Hodges Blue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Premier and Hodges Blue Chip, you can compare the effects of market volatilities on State Street and Hodges Blue 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 State Street with a short position of Hodges Blue. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Hodges Blue.
Diversification Opportunities for State Street and Hodges Blue
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between State and Hodges is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding State Street Premier and Hodges Blue Chip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hodges Blue Chip and State Street 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 State Street Premier are associated (or correlated) with Hodges Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hodges Blue Chip has no effect on the direction of State Street i.e., State Street and Hodges Blue go up and down completely randomly.
Pair Corralation between State Street and Hodges Blue
Assuming the 90 days horizon State Street Premier is expected to generate 1.39 times more return on investment than Hodges Blue. However, State Street is 1.39 times more volatile than Hodges Blue Chip. It trades about 0.1 of its potential returns per unit of risk. Hodges Blue Chip is currently generating about 0.14 per unit of risk. If you would invest 9,613 in State Street Premier on August 31, 2024 and sell it today you would earn a total of 4,750 from holding State Street Premier or generate 49.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Premier vs. Hodges Blue Chip
Performance |
| Timeline |
| State Street Premier |
| Hodges Blue Chip |
State Street and Hodges Blue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Hodges Blue
The main advantage of trading using opposite State Street and Hodges Blue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Hodges Blue 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 Hodges Blue will offset losses from the drop in Hodges Blue's long position.| State Street vs. Vanguard Total Stock | State Street vs. Vanguard 500 Index | State Street vs. Vanguard Total Stock | State Street vs. Vanguard Total Stock |
| Hodges Blue vs. Aquagold International | Hodges Blue vs. Morningstar Unconstrained Allocation | Hodges Blue vs. Thrivent High Yield | Hodges Blue vs. Via Renewables |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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