Correlation Between State Street and SCE Trust
Can any of the company-specific risk be diversified away by investing in both State Street and SCE Trust 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 SCE Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street and SCE Trust III, you can compare the effects of market volatilities on State Street and SCE Trust 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 SCE Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and SCE Trust.
Diversification Opportunities for State Street and SCE Trust
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between State and SCE is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding State Street and SCE Trust III in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCE Trust III 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 SCE Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCE Trust III has no effect on the direction of State Street i.e., State Street and SCE Trust go up and down completely randomly.
Pair Corralation between State Street and SCE Trust
Assuming the 90 days trading horizon State Street is expected to generate 3.67 times less return on investment than SCE Trust. But when comparing it to its historical volatility, State Street is 1.05 times less risky than SCE Trust. It trades about 0.03 of its potential returns per unit of risk. SCE Trust III is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,656 in SCE Trust III on September 2, 2024 and sell it today you would earn a total of 885.00 from holding SCE Trust III or generate 53.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
State Street vs. SCE Trust III
Performance |
| Timeline |
| State Street |
| SCE Trust III |
State Street and SCE Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and SCE Trust
The main advantage of trading using opposite State Street and SCE Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, SCE Trust 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 SCE Trust will offset losses from the drop in SCE Trust'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 |
| SCE Trust vs. SCE Trust IV | SCE Trust vs. SCE Trust V | SCE Trust vs. SCE Trust II | SCE Trust vs. SCE Trust VI |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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