Correlation Between State Street and Elfun Trusts
Can any of the company-specific risk be diversified away by investing in both State Street and Elfun Trusts 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 Elfun Trusts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Target and Elfun Trusts Elfun, you can compare the effects of market volatilities on State Street and Elfun Trusts 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 Elfun Trusts. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Elfun Trusts.
Diversification Opportunities for State Street and Elfun Trusts
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between State and Elfun is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and Elfun Trusts Elfun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elfun Trusts Elfun 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 Target are associated (or correlated) with Elfun Trusts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elfun Trusts Elfun has no effect on the direction of State Street i.e., State Street and Elfun Trusts go up and down completely randomly.
Pair Corralation between State Street and Elfun Trusts
Assuming the 90 days horizon State Street is expected to generate 1.59 times less return on investment than Elfun Trusts. But when comparing it to its historical volatility, State Street Target is 1.32 times less risky than Elfun Trusts. It trades about 0.11 of its potential returns per unit of risk. Elfun Trusts Elfun is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 7,278 in Elfun Trusts Elfun on August 25, 2024 and sell it today you would earn a total of 2,505 from holding Elfun Trusts Elfun or generate 34.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Target vs. Elfun Trusts Elfun
Performance |
| Timeline |
| State Street Target |
| Elfun Trusts Elfun |
State Street and Elfun Trusts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Elfun Trusts
The main advantage of trading using opposite State Street and Elfun Trusts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Elfun Trusts 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 Elfun Trusts will offset losses from the drop in Elfun Trusts' long position.| State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target |
| Elfun Trusts vs. State Street Target | Elfun Trusts vs. State Street Target | Elfun Trusts vs. Ssga International Stock | Elfun Trusts 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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