Correlation Between State Street and Highland Longshort
Can any of the company-specific risk be diversified away by investing in both State Street and Highland Longshort 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 Highland Longshort 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 Highland Longshort Healthcare, you can compare the effects of market volatilities on State Street and Highland Longshort 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 Highland Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Highland Longshort.
Diversification Opportunities for State Street and Highland Longshort
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and Highland is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Longshort 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 Highland Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Longshort has no effect on the direction of State Street i.e., State Street and Highland Longshort go up and down completely randomly.
Pair Corralation between State Street and Highland Longshort
Assuming the 90 days horizon State Street Target is expected to generate 3.42 times more return on investment than Highland Longshort. However, State Street is 3.42 times more volatile than Highland Longshort Healthcare. It trades about 0.1 of its potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.14 per unit of risk. If you would invest 1,489 in State Street Target on September 1, 2024 and sell it today you would earn a total of 139.00 from holding State Street Target or generate 9.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
State Street Target vs. Highland Longshort Healthcare
Performance |
| Timeline |
| State Street Target |
| Highland Longshort |
State Street and Highland Longshort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Highland Longshort
The main advantage of trading using opposite State Street and Highland Longshort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Highland Longshort 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 Highland Longshort will offset losses from the drop in Highland Longshort'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 |
| Highland Longshort vs. Highland Longshort Healthcare | Highland Longshort vs. Highland Merger Arbitrage | Highland Longshort vs. Highland Merger Arbitrage | Highland Longshort vs. Highland Small Cap Equity |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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