Correlation Between State Street and RenaissanceRe Holdings
Can any of the company-specific risk be diversified away by investing in both State Street and RenaissanceRe Holdings 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 RenaissanceRe Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street and RenaissanceRe Holdings, you can compare the effects of market volatilities on State Street and RenaissanceRe Holdings 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 RenaissanceRe Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and RenaissanceRe Holdings.
Diversification Opportunities for State Street and RenaissanceRe Holdings
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between State and RenaissanceRe is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding State Street and RenaissanceRe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenaissanceRe Holdings 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 RenaissanceRe Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenaissanceRe Holdings has no effect on the direction of State Street i.e., State Street and RenaissanceRe Holdings go up and down completely randomly.
Pair Corralation between State Street and RenaissanceRe Holdings
Assuming the 90 days trading horizon State Street is expected to under-perform the RenaissanceRe Holdings. But the preferred stock apears to be less risky and, when comparing its historical volatility, State Street is 1.06 times less risky than RenaissanceRe Holdings. The preferred stock trades about -0.03 of its potential returns per unit of risk. The RenaissanceRe Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,426 in RenaissanceRe Holdings on August 27, 2024 and sell it today you would earn a total of 32.00 from holding RenaissanceRe Holdings or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street vs. RenaissanceRe Holdings
Performance |
| Timeline |
| State Street |
| RenaissanceRe Holdings |
State Street and RenaissanceRe Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and RenaissanceRe Holdings
The main advantage of trading using opposite State Street and RenaissanceRe Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, RenaissanceRe Holdings 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 RenaissanceRe Holdings will offset losses from the drop in RenaissanceRe Holdings' 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 |
| RenaissanceRe Holdings vs. SiriusPoint | RenaissanceRe Holdings vs. Greenlight Capital Re | RenaissanceRe Holdings vs. Maiden Holdings | RenaissanceRe Holdings vs. Renaissancere Holdings |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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