Correlation Between State Street and American Funds
Can any of the company-specific risk be diversified away by investing in both State Street and American Funds 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 American Funds 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 American Funds Retirement, you can compare the effects of market volatilities on State Street and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and American Funds.
Diversification Opportunities for State Street and American Funds
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and American is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and American Funds Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Retirement 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Retirement has no effect on the direction of State Street i.e., State Street and American Funds go up and down completely randomly.
Pair Corralation between State Street and American Funds
Assuming the 90 days horizon State Street Target is expected to generate 1.6 times more return on investment than American Funds. However, State Street is 1.6 times more volatile than American Funds Retirement. It trades about 0.33 of its potential returns per unit of risk. American Funds Retirement is currently generating about 0.23 per unit of risk. If you would invest 1,619 in State Street Target on September 1, 2024 and sell it today you would earn a total of 66.00 from holding State Street Target or generate 4.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
State Street Target vs. American Funds Retirement
Performance |
| Timeline |
| State Street Target |
| American Funds Retirement |
State Street and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and American Funds
The main advantage of trading using opposite State Street and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| State Street vs. American Funds Retirement | State Street vs. Fidelity Managed Retirement | State Street vs. Multimanager Lifestyle Moderate | State Street vs. Dimensional Retirement Income |
| American Funds vs. Mesirow Financial Small | American Funds vs. Davis Financial Fund | American Funds vs. Icon Financial Fund | American Funds vs. Blackrock Financial Institutions |
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..
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |