Correlation Between State Street and Sierra Tactical
Can any of the company-specific risk be diversified away by investing in both State Street and Sierra Tactical 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 Sierra Tactical 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 Sierra Tactical Municipal, you can compare the effects of market volatilities on State Street and Sierra Tactical 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 Sierra Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Sierra Tactical.
Diversification Opportunities for State Street and Sierra Tactical
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between State and Sierra is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding State Street Premier and Sierra Tactical Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Municipal 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 Sierra Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Municipal has no effect on the direction of State Street i.e., State Street and Sierra Tactical go up and down completely randomly.
Pair Corralation between State Street and Sierra Tactical
Assuming the 90 days horizon State Street Premier is expected to generate 4.02 times more return on investment than Sierra Tactical. However, State Street is 4.02 times more volatile than Sierra Tactical Municipal. It trades about 0.09 of its potential returns per unit of risk. Sierra Tactical Municipal is currently generating about 0.01 per unit of risk. If you would invest 13,369 in State Street Premier on August 28, 2024 and sell it today you would earn a total of 862.00 from holding State Street Premier or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Premier vs. Sierra Tactical Municipal
Performance |
| Timeline |
| State Street Premier |
| Sierra Tactical Municipal |
State Street and Sierra Tactical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Sierra Tactical
The main advantage of trading using opposite State Street and Sierra Tactical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Sierra Tactical 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 Sierra Tactical will offset losses from the drop in Sierra Tactical'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 |
| Sierra Tactical vs. Live Oak Health | Sierra Tactical vs. Baillie Gifford Health | Sierra Tactical vs. Alger Health Sciences | Sierra Tactical vs. Allianzgi Health Sciences |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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