Correlation Between Versatile Bond and State Street

Can any of the company-specific risk be diversified away by investing in both Versatile Bond and State Street 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 Versatile Bond and State Street into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Versatile Bond Portfolio and State Street Core, you can compare the effects of market volatilities on Versatile Bond and State Street 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 Versatile Bond with a short position of State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Versatile Bond and State Street.

Diversification Opportunities for Versatile Bond and State Street

0.87

Correlation Coefficient

Versatile Bond  State Street

Very poor diversification

The 3 months correlation between Versatile and State is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Versatile Bond Portfolio and State Street Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Core and Versatile Bond 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 Versatile Bond Portfolio are associated (or correlated) with State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Core has no effect on the direction of Versatile Bond i.e., Versatile Bond and State Street go up and down completely randomly.

Pair Corralation between Versatile Bond and State Street

Assuming the 90 days horizon Versatile Bond is expected to generate 4.13 times less return on investment than State Street. But when comparing it to its historical volatility, Versatile Bond Portfolio is 6.94 times less risky than State Street. It trades about 0.3 of its potential returns per unit of risk. State Street Core is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,850  in State Street Core on July 31, 2025 and sell it today you would earn a total of  635.00  from holding State Street Core or generate 8.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Versatile Bond Portfolio  vs.  State Street Core

Versatile Bond Portfolio

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Versatile Bond Portfolio are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Versatile Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

State Street Core

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Core are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, State Street may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Pair Trading with Versatile Bond and State Street

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

The idea behind Versatile Bond Portfolio and State Street Core 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.