Correlation Between State Street and 3i Group
Can any of the company-specific risk be diversified away by investing in both State Street and 3i Group 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 3i Group 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 3i Group plc, you can compare the effects of market volatilities on State Street and 3i Group 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 3i Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and 3i Group.
Diversification Opportunities for State Street and 3i Group
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and TGOPF is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding State Street Corp and 3i Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3i Group plc 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 3i Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3i Group plc has no effect on the direction of State Street i.e., State Street and 3i Group go up and down completely randomly.
Pair Corralation between State Street and 3i Group
Considering the 90-day investment horizon State Street is expected to generate 3.45 times less return on investment than 3i Group. But when comparing it to its historical volatility, State Street Corp is 1.69 times less risky than 3i Group. It trades about 0.06 of its potential returns per unit of risk. 3i Group plc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,144 in 3i Group plc on January 20, 2024 and sell it today you would earn a total of 336.00 from holding 3i Group plc or generate 10.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
State Street Corp vs. 3i Group plc
Performance |
| Timeline |
| State Street Corp |
| 3i Group plc |
State Street and 3i Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and 3i Group
The main advantage of trading using opposite State Street and 3i Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street position performs unexpectedly, 3i Group 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 3i Group will offset losses from the drop in 3i Group's long position.| State Street vs. Northern Trust | State Street vs. Franklin Resources | State Street vs. Invesco Plc | State Street vs. T Rowe Price |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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