Correlation Between State Street and Intermail

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Can any of the company-specific risk be diversified away by investing in both State Street and Intermail 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 Intermail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Aggregate and Intermail AS, you can compare the effects of market volatilities on State Street and Intermail 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 Intermail. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Intermail.

Diversification Opportunities for State Street and Intermail

-0.32
  Correlation Coefficient

Very good diversification

The 3 months correlation between State and Intermail is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding State Street Aggregate and Intermail AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermail AS 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 Aggregate are associated (or correlated) with Intermail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermail AS has no effect on the direction of State Street i.e., State Street and Intermail go up and down completely randomly.

Pair Corralation between State Street and Intermail

Assuming the 90 days horizon State Street Aggregate is expected to generate 0.24 times more return on investment than Intermail. However, State Street Aggregate is 4.14 times less risky than Intermail. It trades about -0.25 of its potential returns per unit of risk. Intermail AS is currently generating about -0.1 per unit of risk. If you would invest  8,514  in State Street Aggregate on January 26, 2024 and sell it today you would lose (179.00) from holding State Street Aggregate or give up 2.1% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy86.36%
ValuesDaily Returns

State Street Aggregate  vs.  Intermail AS

 Performance 
       Timeline  
State Street Aggregate 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days State Street Aggregate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Intermail AS 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Intermail AS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Intermail exhibited solid returns over the last few months and may actually be approaching a breakup point.

State Street and Intermail Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with State Street and Intermail

The main advantage of trading using opposite State Street and Intermail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Intermail 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 Intermail will offset losses from the drop in Intermail's long position.
The idea behind State Street Aggregate and Intermail AS 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.
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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