Correlation Between State Street and Cref Inflation

Can any of the company-specific risk be diversified away by investing in both State Street and Cref Inflation 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 Cref Inflation 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 Cref Inflation Linked Bond, you can compare the effects of market volatilities on State Street and Cref Inflation 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 Cref Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and Cref Inflation.

Diversification Opportunities for State Street and Cref Inflation

0.95

Correlation Coefficient

State Street  Cref Inflation

Almost no diversification

The 3 months correlation between State and Cref is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding State Street Aggregate and Cref Inflation Linked Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Inflation Linked 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 Cref Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Inflation Linked has no effect on the direction of State Street i.e., State Street and Cref Inflation go up and down completely randomly.

Pair Corralation between State Street and Cref Inflation

Assuming the 90 days horizon State Street Aggregate is expected to generate 1.53 times more return on investment than Cref Inflation. However, State Street is 1.53 times more volatile than Cref Inflation Linked Bond. It trades about 0.15 of its potential returns per unit of risk. Cref Inflation Linked Bond is currently generating about 0.19 per unit of risk. If you would invest  8,442  in State Street Aggregate on May 20, 2025 and sell it today you would earn a total of  213.00  from holding State Street Aggregate or generate 2.52% 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 Aggregate  vs.  Cref Inflation Linked Bond

State Street Aggregate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Street Aggregate are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong 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.

Cref Inflation Linked

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cref Inflation Linked Bond are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Cref Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with State Street and Cref Inflation

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

The idea behind State Street Aggregate and Cref Inflation Linked Bond 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.