Correlation Between State Street and Dow Jones
Can any of the company-specific risk be diversified away by investing in both State Street and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Equity and Dow Jones Industrial, you can compare the effects of market volatilities on State Street and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Dow Jones.
Diversification Opportunities for State Street and Dow Jones
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between State and Dow is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding State Street Equity and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Equity are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of State Street i.e., State Street and Dow Jones go up and down completely randomly.
Pair Corralation between State Street and Dow Jones
Assuming the 90 days horizon State Street Equity is expected to generate 1.13 times more return on investment than Dow Jones. However, State Street is 1.13 times more volatile than Dow Jones Industrial. It trades about 0.11 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 35,388 in State Street Equity on August 29, 2024 and sell it today you would earn a total of 19,974 from holding State Street Equity or generate 56.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Equity vs. Dow Jones Industrial
Performance |
| Timeline |
State Street and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
State Street Equity
Pair trading matchups for State Street
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with State Street and Dow Jones
The main advantage of trading using opposite State Street and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 Target |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |