Correlation Between State Street and Select Fund

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

By analyzing existing cross correlation between State Street Institutional and Select Fund I, you can compare the effects of market volatilities on State Street and Select Fund 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 Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Select Fund.

Diversification Opportunities for State Street and Select Fund

0.98

Correlation Coefficient

State Street  Select Fund

Almost no diversification

The 3 months correlation between State and Select is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding State Street Institutional and Select Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund I 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 Institutional are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund I has no effect on the direction of State Street i.e., State Street and Select Fund go up and down completely randomly.

Pair Corralation between State Street and Select Fund

Assuming the 90 days horizon State Street is expected to generate 1.62 times less return on investment than Select Fund. In addition to that, State Street is 1.01 times more volatile than Select Fund I. It trades about 0.19 of its total potential returns per unit of risk. Select Fund I is currently generating about 0.31 per unit of volatility. If you would invest  10,683  in Select Fund I on April 17, 2025 and sell it today you would earn a total of  2,519  from holding Select Fund I or generate 23.58% return on investment over 90 days.

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

State Street Institutional  vs.  Select Fund I

State Street Institu

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Institutional are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, State Street showed solid returns over the last few months and may actually be approaching a breakup point.

Select Fund I

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Select Fund I are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Select Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with State Street and Select Fund

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

The idea behind State Street Institutional and Select Fund I 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.