Correlation Between State Street and Strategic Investments
Can any of the company-specific risk be diversified away by investing in both State Street and Strategic Investments 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 Strategic Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street and Strategic Investments AS, you can compare the effects of market volatilities on State Street and Strategic Investments 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 Strategic Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Strategic Investments.
Diversification Opportunities for State Street and Strategic Investments
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between State and Strategic is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Strategic Investments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Investments 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 Strategic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Investments has no effect on the direction of State Street i.e., State Street and Strategic Investments go up and down completely randomly.
Pair Corralation between State Street and Strategic Investments
Assuming the 90 days horizon State Street is expected to generate 1.88 times less return on investment than Strategic Investments. But when comparing it to its historical volatility, State Street is 3.17 times less risky than Strategic Investments. It trades about 0.04 of its potential returns per unit of risk. Strategic Investments AS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Strategic Investments AS on November 8, 2024 and sell it today you would earn a total of 0.00 from holding Strategic Investments AS or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
State Street vs. Strategic Investments AS
Performance |
| Timeline |
| State Street |
| Strategic Investments |
State Street and Strategic Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Strategic Investments
The main advantage of trading using opposite State Street and Strategic Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Strategic Investments 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 Strategic Investments will offset losses from the drop in Strategic Investments' long position.| State Street vs. EAT WELL INVESTMENT | State Street vs. China National Building | State Street vs. Rayonier Advanced Materials | State Street vs. PennantPark Investment |
| Strategic Investments vs. NTT DATA | Strategic Investments vs. Teradata Corp | Strategic Investments vs. Alliance Data Systems | Strategic Investments vs. Linedata Services SA |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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