Correlation Between State Street and Mondrian Emerging
Can any of the company-specific risk be diversified away by investing in both State Street and Mondrian Emerging 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 Mondrian Emerging 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 Mondrian Emerging Markets, you can compare the effects of market volatilities on State Street and Mondrian Emerging 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 Mondrian Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Mondrian Emerging.
Diversification Opportunities for State Street and Mondrian Emerging
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between State and Mondrian is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and Mondrian Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondrian Emerging Markets 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 Mondrian Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondrian Emerging Markets has no effect on the direction of State Street i.e., State Street and Mondrian Emerging go up and down completely randomly.
Pair Corralation between State Street and Mondrian Emerging
Assuming the 90 days horizon State Street Target is expected to generate 0.6 times more return on investment than Mondrian Emerging. However, State Street Target is 1.66 times less risky than Mondrian Emerging. It trades about 0.1 of its potential returns per unit of risk. Mondrian Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest 1,092 in State Street Target on September 5, 2024 and sell it today you would earn a total of 313.00 from holding State Street Target or generate 28.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Target vs. Mondrian Emerging Markets
Performance |
| Timeline |
| State Street Target |
| Mondrian Emerging Markets |
State Street and Mondrian Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Mondrian Emerging
The main advantage of trading using opposite State Street and Mondrian Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Mondrian Emerging 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 Mondrian Emerging will offset losses from the drop in Mondrian Emerging's long position.| State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target | State Street vs. State Street Aggregate |
| Mondrian Emerging vs. Arrow Managed Futures | Mondrian Emerging vs. Scharf Global Opportunity | Mondrian Emerging vs. Iaadx | Mondrian Emerging vs. Bbh Intermediate Municipal |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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