Correlation Between State Street and AMTD IDEA

Can any of the company-specific risk be diversified away by investing in both State Street and AMTD IDEA 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 AMTD IDEA 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 AMTD IDEA Group, you can compare the effects of market volatilities on State Street and AMTD IDEA 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 AMTD IDEA. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and AMTD IDEA.

Diversification Opportunities for State Street and AMTD IDEA

0.33

Correlation Coefficient

State Street  AMTD IDEA

Weak diversification

The 3 months correlation between State and AMTD is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp and AMTD IDEA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMTD IDEA Group 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 AMTD IDEA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMTD IDEA Group has no effect on the direction of State Street i.e., State Street and AMTD IDEA go up and down completely randomly.

Pair Corralation between State Street and AMTD IDEA

Considering the 90-day investment horizon State Street Corp is expected to generate 0.44 times more return on investment than AMTD IDEA. However, State Street Corp is 2.29 times less risky than AMTD IDEA. It trades about 0.05 of its potential returns per unit of risk. AMTD IDEA Group is currently generating about -0.01 per unit of risk. If you would invest  7,220  in State Street Corp on March 13, 2024 and sell it today you would earn a total of  215.00  from holding State Street Corp or generate 2.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

State Street Corp  vs.  AMTD IDEA Group

State Street Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, State Street is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

AMTD IDEA Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMTD IDEA Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AMTD IDEA is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with State Street and AMTD IDEA

The main advantage of trading using opposite State Street and AMTD IDEA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, AMTD IDEA 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 AMTD IDEA will offset losses from the drop in AMTD IDEA's long position.

The idea behind State Street Corp and AMTD IDEA Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.