Correlation Between State Street and European Equity
Can any of the company-specific risk be diversified away by investing in both State Street and European Equity 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 European Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Corp and European Equity Closed, you can compare the effects of market volatilities on State Street and European Equity 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 European Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and European Equity.
Diversification Opportunities for State Street and European Equity
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between State and European is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp and European Equity Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Equity Closed 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 Corp are associated (or correlated) with European Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Equity Closed has no effect on the direction of State Street i.e., State Street and European Equity go up and down completely randomly.
Pair Corralation between State Street and European Equity
Considering the 90-day investment horizon State Street Corp is expected to generate 1.51 times more return on investment than European Equity. However, State Street is 1.51 times more volatile than European Equity Closed. It trades about 0.22 of its potential returns per unit of risk. European Equity Closed is currently generating about -0.37 per unit of risk. If you would invest 9,298 in State Street Corp on August 27, 2024 and sell it today you would earn a total of 581.00 from holding State Street Corp or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Corp vs. European Equity Closed
Performance |
| Timeline |
| State Street Corp |
| European Equity Closed |
State Street and European Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and European Equity
The main advantage of trading using opposite State Street and European Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, European Equity 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 European Equity will offset losses from the drop in European Equity's long position.| State Street vs. Northern Trust | State Street vs. Franklin Resources | State Street vs. Invesco Plc | State Street vs. T Rowe Price |
| European Equity vs. XAI Octagon Floating | European Equity vs. MFS Charter Income | European Equity vs. Nuveen New York | European Equity vs. Invesco High Income |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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