Correlation Between State Street and EQT AB

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

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

Diversification Opportunities for State Street and EQT AB

0.71

Correlation Coefficient

State Street  EQT AB

Poor diversification

The 3 months correlation between State and EQT is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding State Street and EQT AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT AB 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 EQT AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT AB has no effect on the direction of State Street i.e., State Street and EQT AB go up and down completely randomly.

Pair Corralation between State Street and EQT AB

Assuming the 90 days horizon State Street is expected to under-perform the EQT AB. But the stock apears to be less risky and, when comparing its historical volatility, State Street is 1.47 times less risky than EQT AB. The stock trades about -0.23 of its potential returns per unit of risk. The EQT AB is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,719  in EQT AB on January 8, 2025 and sell it today you would lose (538.00) from holding EQT AB or give up 19.79% of portfolio value over 90 days.

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

State Street  vs.  EQT AB

State Street

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

EQT AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days EQT AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with State Street and EQT AB

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

The idea behind State Street and EQT AB 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 Stocks Directory module to find actively traded stocks across global markets.