Correlation Between Ab Bond and State Farm

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Can any of the company-specific risk be diversified away by investing in both Ab Bond 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 Ab Bond and State Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Bond Inflation and State Farm Growth, you can compare the effects of market volatilities on Ab Bond 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 Ab Bond with a short position of State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Bond and State Farm.

Diversification Opportunities for Ab Bond and State Farm

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ABNYX and State is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ab Bond Inflation and State Farm Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Growth and Ab Bond 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 Ab Bond Inflation 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 Growth has no effect on the direction of Ab Bond i.e., Ab Bond and State Farm go up and down completely randomly.

Pair Corralation between Ab Bond and State Farm

Assuming the 90 days horizon Ab Bond is expected to generate 1.88 times less return on investment than State Farm. But when comparing it to its historical volatility, Ab Bond Inflation is 4.31 times less risky than State Farm. It trades about 0.08 of its potential returns per unit of risk. State Farm Growth is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,808  in State Farm Growth on October 5, 2024 and sell it today you would earn a total of  946.00  from holding State Farm Growth or generate 8.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Ab Bond Inflation  vs.  State Farm Growth

 Performance 
       Timeline  
Ab Bond Inflation 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ab Bond Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ab Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
State Farm Growth 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days State Farm Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, State Farm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Bond and State Farm Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ab Bond and State Farm

The main advantage of trading using opposite Ab Bond and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Bond 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.
The idea behind Ab Bond Inflation and State Farm Growth 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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