Correlation Between State Street and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both State Street and Emerging Markets 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 Emerging Markets 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 Emerging Markets Fund, you can compare the effects of market volatilities on State Street and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Emerging Markets.
Diversification Opportunities for State Street and Emerging Markets
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between State and Emerging is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding State Street Equity and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of State Street i.e., State Street and Emerging Markets go up and down completely randomly.
Pair Corralation between State Street and Emerging Markets
Assuming the 90 days horizon State Street Equity is expected to generate 0.93 times more return on investment than Emerging Markets. However, State Street Equity is 1.07 times less risky than Emerging Markets. It trades about 0.15 of its potential returns per unit of risk. Emerging Markets Fund is currently generating about -0.14 per unit of risk. If you would invest 43,839 in State Street Equity on August 24, 2024 and sell it today you would earn a total of 1,192 from holding State Street Equity or generate 2.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Equity vs. Emerging Markets Fund
Performance |
| Timeline |
| State Street Equity |
| Emerging Markets |
State Street and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Emerging Markets
The main advantage of trading using opposite State Street and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Emerging Markets 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 Emerging Markets will offset losses from the drop in Emerging Markets' long position.| State Street vs. Calvert Short Duration | State Street vs. Aqr Long Short Equity | State Street vs. Angel Oak Ultrashort | State Street vs. Ultra Short Fixed Income |
| Emerging Markets vs. Janus Triton Fund | Emerging Markets vs. Blackrock International Index | Emerging Markets vs. Real Estate Securities | Emerging Markets vs. State Street 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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