Correlation Between State Street and Vela Large
Can any of the company-specific risk be diversified away by investing in both State Street and Vela Large 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 Vela Large 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 Vela Large Cap, you can compare the effects of market volatilities on State Street and Vela Large 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 Vela Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Vela Large.
Diversification Opportunities for State Street and Vela Large
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and Vela is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and Vela Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela Large Cap 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 Vela Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela Large Cap has no effect on the direction of State Street i.e., State Street and Vela Large go up and down completely randomly.
Pair Corralation between State Street and Vela Large
Assuming the 90 days horizon State Street is expected to generate 1.29 times less return on investment than Vela Large. In addition to that, State Street is 1.08 times more volatile than Vela Large Cap. It trades about 0.1 of its total potential returns per unit of risk. Vela Large Cap is currently generating about 0.13 per unit of volatility. If you would invest 1,408 in Vela Large Cap on August 31, 2024 and sell it today you would earn a total of 424.00 from holding Vela Large Cap or generate 30.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Target vs. Vela Large Cap
Performance |
| Timeline |
| State Street Target |
| Vela Large Cap |
State Street and Vela Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Vela Large
The main advantage of trading using opposite State Street and Vela Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Vela Large 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 Vela Large will offset losses from the drop in Vela Large's long position.| State Street vs. Western Asset Diversified | State Street vs. Massmutual Premier Diversified | State Street vs. Jhancock Diversified Macro | State Street vs. Pgim Conservative Retirement |
| Vela Large vs. Ab Bond Inflation | Vela Large vs. Bbh Intermediate Municipal | Vela Large vs. Blrc Sgy Mnp | Vela Large vs. Multisector Bond Sma |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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