Correlation Between State Street and Financials Ultrasector
Can any of the company-specific risk be diversified away by investing in both State Street and Financials Ultrasector 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 Financials Ultrasector 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 Financials Ultrasector Profund, you can compare the effects of market volatilities on State Street and Financials Ultrasector 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 Financials Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Financials Ultrasector.
Diversification Opportunities for State Street and Financials Ultrasector
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between State and Financials is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector 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 Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of State Street i.e., State Street and Financials Ultrasector go up and down completely randomly.
Pair Corralation between State Street and Financials Ultrasector
Assuming the 90 days horizon State Street is expected to generate 4.65 times less return on investment than Financials Ultrasector. But when comparing it to its historical volatility, State Street Target is 3.81 times less risky than Financials Ultrasector. It trades about 0.14 of its potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,415 in Financials Ultrasector Profund on September 1, 2024 and sell it today you would earn a total of 1,215 from holding Financials Ultrasector Profund or generate 35.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
State Street Target vs. Financials Ultrasector Profund
Performance |
| Timeline |
| State Street Target |
| Financials Ultrasector |
State Street and Financials Ultrasector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Financials Ultrasector
The main advantage of trading using opposite State Street and Financials Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Financials Ultrasector 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 Financials Ultrasector will offset losses from the drop in Financials Ultrasector's 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 |
| Financials Ultrasector vs. Aqr Long Short Equity | Financials Ultrasector vs. Ab All Market | Financials Ultrasector vs. Sp Midcap Index | Financials Ultrasector vs. Western Asset Diversified |
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.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |