Correlation Between Us Government and State Street
Can any of the company-specific risk be diversified away by investing in both Us Government and State Street 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 Us Government and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and State Street Income, you can compare the effects of market volatilities on Us Government and State Street 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 Us Government with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and State Street.
Diversification Opportunities for Us Government and State Street
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between USGFX and State is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and State Street Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Income and Us Government 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 Us Government Securities are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Income has no effect on the direction of Us Government i.e., Us Government and State Street go up and down completely randomly.
Pair Corralation between Us Government and State Street
Assuming the 90 days horizon Us Government is expected to generate 1.84 times less return on investment than State Street. But when comparing it to its historical volatility, Us Government Securities is 1.34 times less risky than State Street. It trades about 0.06 of its potential returns per unit of risk. State Street Income is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 979.00 in State Street Income on September 1, 2024 and sell it today you would earn a total of 8.00 from holding State Street Income or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Us Government Securities vs. State Street Income
Performance |
| Timeline |
| Us Government Securities |
| State Street Income |
Us Government and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and State Street
The main advantage of trading using opposite Us Government and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Us Government vs. Government Securities Fund | Us Government vs. John Hancock Government | Us Government vs. Short Term Government Fund | Us Government vs. Blackrock Government Bond |
| State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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