Correlation Between American Balanced and State Farm
Can any of the company-specific risk be diversified away by investing in both American Balanced and State Farm 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 American Balanced and State Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and State Farm Balanced, you can compare the effects of market volatilities on American Balanced and State Farm 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 American Balanced with a short position of State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and State Farm.
Diversification Opportunities for American Balanced and State Farm
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and State is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and State Farm Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Balanced and American Balanced 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 American Balanced are associated (or correlated) with State Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Farm Balanced has no effect on the direction of American Balanced i.e., American Balanced and State Farm go up and down completely randomly.
Pair Corralation between American Balanced and State Farm
Assuming the 90 days horizon American Balanced is expected to generate 1.01 times more return on investment than State Farm. However, American Balanced is 1.01 times more volatile than State Farm Balanced. It trades about -0.02 of its potential returns per unit of risk. State Farm Balanced is currently generating about -0.07 per unit of risk. If you would invest 3,431 in American Balanced on December 28, 2024 and sell it today you would lose (29.00) from holding American Balanced or give up 0.85% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
American Balanced vs. State Farm Balanced
Performance |
Timeline |
American Balanced |
State Farm Balanced |
American Balanced and State Farm Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Balanced and State Farm
The main advantage of trading using opposite American Balanced and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, State Farm 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 State Farm will offset losses from the drop in State Farm's long position.American Balanced vs. Income Fund Of | American Balanced vs. Capital Income Builder | American Balanced vs. Capital World Growth | American Balanced vs. Growth Fund Of |
State Farm vs. State Farm Growth | State Farm vs. State Farm Municipal | State Farm vs. State Farm Interim | State Farm vs. State Farm International |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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