Correlation Between State Street and Diversified Income
Can any of the company-specific risk be diversified away by investing in both State Street and Diversified Income 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 Diversified Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Target and Diversified Income Fund, you can compare the effects of market volatilities on State Street and Diversified Income 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 Diversified Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Diversified Income.
Diversification Opportunities for State Street and Diversified Income
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between State and Diversified is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and Diversified Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Income 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 Target are associated (or correlated) with Diversified Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Income has no effect on the direction of State Street i.e., State Street and Diversified Income go up and down completely randomly.
Pair Corralation between State Street and Diversified Income
Assuming the 90 days horizon State Street Target is expected to generate 1.82 times more return on investment than Diversified Income. However, State Street is 1.82 times more volatile than Diversified Income Fund. It trades about 0.4 of its potential returns per unit of risk. Diversified Income Fund is currently generating about 0.14 per unit of risk. If you would invest 1,536 in State Street Target on April 26, 2025 and sell it today you would earn a total of 51.00 from holding State Street Target or generate 3.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
State Street Target vs. Diversified Income Fund
Performance |
Timeline |
State Street Target |
Diversified Income |
State Street and Diversified Income Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with State Street and Diversified Income
The main advantage of trading using opposite State Street and Diversified Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Diversified Income 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 Diversified Income will offset losses from the drop in Diversified Income's long position.State Street vs. Tiaa Cref Small Cap Equity | State Street vs. T Rowe Price | State Street vs. Mid Cap Growth Profund | State Street vs. Omni Small Cap Value |
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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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