Correlation Between State Street and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both State Street and Vanguard Emerging 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 Vanguard Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Emerging and Vanguard Emerging Markets, you can compare the effects of market volatilities on State Street and Vanguard Emerging 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 Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Vanguard Emerging.
Diversification Opportunities for State Street and Vanguard Emerging
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between State and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding State Street Emerging and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets 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 Emerging are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of State Street i.e., State Street and Vanguard Emerging go up and down completely randomly.
Pair Corralation between State Street and Vanguard Emerging
Assuming the 90 days horizon State Street Emerging is expected to under-perform the Vanguard Emerging. In addition to that, State Street is 1.32 times more volatile than Vanguard Emerging Markets. It trades about -0.02 of its total potential returns per unit of risk. Vanguard Emerging Markets is currently generating about -0.01 per unit of volatility. If you would invest 2,641 in Vanguard Emerging Markets on January 26, 2024 and sell it today you would lose (4.00) from holding Vanguard Emerging Markets or give up 0.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Emerging vs. Vanguard Emerging Markets
Performance |
| Timeline |
| State Street Emerging |
| Vanguard Emerging Markets |
State Street and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and Vanguard Emerging
The main advantage of trading using opposite State Street and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, Vanguard Emerging 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 Vanguard Emerging will offset losses from the drop in Vanguard Emerging's long position.| State Street vs. Amana Income Fund | State Street vs. Amana Growth Fund | State Street vs. Amana Participation Fund | State Street vs. HUMANA INC |
| Vanguard Emerging vs. Vanguard Emerging Markets | Vanguard Emerging vs. Vanguard Emerging Markets | Vanguard Emerging vs. Vanguard Emerging Markets | Vanguard Emerging vs. American Funds New |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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