Correlation Between State Street and Great Elm
Can any of the company-specific risk be diversified away by investing in both State Street and Great Elm 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 Great Elm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street and Great Elm Capital, you can compare the effects of market volatilities on State Street and Great Elm 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 Great Elm. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Great Elm.
Diversification Opportunities for State Street and Great Elm
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between State and Great is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Great Elm Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Capital 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 are associated (or correlated) with Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Capital has no effect on the direction of State Street i.e., State Street and Great Elm go up and down completely randomly.
Pair Corralation between State Street and Great Elm
Assuming the 90 days trading horizon State Street is expected to under-perform the Great Elm. In addition to that, State Street is 2.04 times more volatile than Great Elm Capital. It trades about -0.08 of its total potential returns per unit of risk. Great Elm Capital is currently generating about -0.01 per unit of volatility. If you would invest 2,482 in Great Elm Capital on August 31, 2024 and sell it today you would lose (1.00) from holding Great Elm Capital or give up 0.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street vs. Great Elm Capital
Performance |
| Timeline |
| State Street |
| Great Elm Capital |
State Street and Great Elm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Great Elm
The main advantage of trading using opposite State Street and Great Elm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Great Elm 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 Great Elm will offset losses from the drop in Great Elm's long position.| State Street vs. The Gabelli Equity | State Street vs. The Gabelli Multimedia | State Street vs. The Gabelli Equity | State Street vs. Virtus AllianzGI Convertible |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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