Correlation Between State Street and Ellsworth Growth

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

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

Diversification Opportunities for State Street and Ellsworth Growth

0.92

Correlation Coefficient

State Street  Ellsworth Growth

Almost no diversification

The 3 months correlation between State and Ellsworth is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding State Street and Ellsworth Growth and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ellsworth Growth 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 are associated (or correlated) with Ellsworth Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ellsworth Growth has no effect on the direction of State Street i.e., State Street and Ellsworth Growth go up and down completely randomly.

Pair Corralation between State Street and Ellsworth Growth

Assuming the 90 days trading horizon State Street is expected to generate 1.42 times less return on investment than Ellsworth Growth. But when comparing it to its historical volatility, State Street is 1.03 times less risky than Ellsworth Growth. It trades about 0.12 of its potential returns per unit of risk. Ellsworth Growth and is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,162  in Ellsworth Growth and on July 14, 2024 and sell it today you would earn a total of  237.00  from holding Ellsworth Growth and or generate 10.96% 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  vs.  Ellsworth Growth and

State Street

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Street are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, State Street is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ellsworth Growth

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ellsworth Growth and are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Ellsworth Growth may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with State Street and Ellsworth Growth

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

The idea behind State Street and Ellsworth Growth and 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.