Correlation Between State Street and Ssga International
Can any of the company-specific risk be diversified away by investing in both State Street and Ssga International 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 Ssga International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Global and Ssga International Stock, you can compare the effects of market volatilities on State Street and Ssga International 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 Ssga International. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Ssga International.
Diversification Opportunities for State Street and Ssga International
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between State and Ssga is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding State Street Global and Ssga International Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ssga International Stock 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 Global are associated (or correlated) with Ssga International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ssga International Stock has no effect on the direction of State Street i.e., State Street and Ssga International go up and down completely randomly.
Pair Corralation between State Street and Ssga International
Assuming the 90 days horizon State Street Global is expected to under-perform the Ssga International. But the mutual fund apears to be less risky and, when comparing its historical volatility, State Street Global is 1.16 times less risky than Ssga International. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Ssga International Stock is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,137 in Ssga International Stock on September 1, 2024 and sell it today you would earn a total of 7.00 from holding Ssga International Stock or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Global vs. Ssga International Stock
Performance |
| Timeline |
| State Street Global |
| Ssga International Stock |
State Street and Ssga International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Ssga International
The main advantage of trading using opposite State Street and Ssga International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Ssga International 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 Ssga International will offset losses from the drop in Ssga International'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 |
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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.
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