A news release said the Systemic Risk Index describes the degree to which a small number of macro risk factors, as opposed to stock- or industry-specific news, can drive stock returns.
The components of State Street’s Systemic Risk Index are made up of approximately 60 industrial sectors. The Index provides a single, daily measure of fragility and can help portfolio managers determine when they should consider hedging their portfolios or change investment strategies, the company said.
“In today’s market, investors are continually looking for new ways to manage risk in their portfolios,” said Will Kinlaw, managing director and head of Portfolio and Risk Management Research at State Street Global Markets, in the news release. “State Street’s Systemic Risk Index is designed to provide institutional investors with an early indication of fragility within the U.S. market so that they can adjust their strategies accordingly and maximize returns even in a difficult market environment.”
The Systemic Risk Index was developed by State Street Associates in collaboration with Windham Capital Management, LLC, a Boston-based investment management boutique.