Correlation Between State Street and Mid Capitalization
Can any of the company-specific risk be diversified away by investing in both State Street and Mid Capitalization 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 Mid Capitalization into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Institutional and Mid Capitalization Portfolio, you can compare the effects of market volatilities on State Street and Mid Capitalization 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 Mid Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Mid Capitalization.
Diversification Opportunities for State Street and Mid Capitalization
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between State and Mid is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding State Street Institutional and Mid Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Capitalization 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 Institutional are associated (or correlated) with Mid Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Capitalization has no effect on the direction of State Street i.e., State Street and Mid Capitalization go up and down completely randomly.
Pair Corralation between State Street and Mid Capitalization
Assuming the 90 days horizon State Street is expected to generate 1.94 times less return on investment than Mid Capitalization. In addition to that, State Street is 1.26 times more volatile than Mid Capitalization Portfolio. It trades about 0.1 of its total potential returns per unit of risk. Mid Capitalization Portfolio is currently generating about 0.25 per unit of volatility. If you would invest 1,345 in Mid Capitalization Portfolio on April 16, 2025 and sell it today you would earn a total of 55.00 from holding Mid Capitalization Portfolio or generate 4.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Institutional vs. Mid Capitalization Portfolio
Performance |
| Timeline |
| State Street Institu |
| Mid Capitalization |
State Street and Mid Capitalization Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Mid Capitalization
The main advantage of trading using opposite State Street and Mid Capitalization positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Mid Capitalization 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 Mid Capitalization will offset losses from the drop in Mid Capitalization's long position.| State Street vs. State Street Core | State Street vs. State Street Income | State Street vs. State Street Institutional |
| Mid Capitalization vs. Lord Abbett Short | Mid Capitalization vs. Pace High Yield | Mid Capitalization vs. Virtus High Yield | Mid Capitalization vs. Transamerica High Yield |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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