Correlation Between State Street and Prospect Capital
Can any of the company-specific risk be diversified away by investing in both State Street and Prospect Capital 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 Prospect Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street and Prospect Capital, you can compare the effects of market volatilities on State Street and Prospect Capital 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 Prospect Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Prospect Capital.
Diversification Opportunities for State Street and Prospect Capital
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and Prospect is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect 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 Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of State Street i.e., State Street and Prospect Capital go up and down completely randomly.
Pair Corralation between State Street and Prospect Capital
Assuming the 90 days trading horizon State Street is expected to generate 3.73 times less return on investment than Prospect Capital. But when comparing it to its historical volatility, State Street is 2.46 times less risky than Prospect Capital. It trades about 0.04 of its potential returns per unit of risk. Prospect Capital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,391 in Prospect Capital on August 27, 2024 and sell it today you would earn a total of 524.00 from holding Prospect Capital or generate 37.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street vs. Prospect Capital
Performance |
| Timeline |
| State Street |
| Prospect Capital |
State Street and Prospect Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Prospect Capital
The main advantage of trading using opposite State Street and Prospect Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Prospect Capital 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 Prospect Capital will offset losses from the drop in Prospect Capital'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 |
| Prospect Capital vs. PennyMac Mortgage Investment | Prospect Capital vs. SiriusPoint | Prospect Capital vs. Telephone and Data | Prospect Capital vs. ARMOUR Residential REIT |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |