Correlation Between Bruce Fund and State Farm

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

By analyzing existing cross correlation between Bruce Fund Bruce and State Farm International, you can compare the effects of market volatilities on Bruce Fund 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 Bruce Fund with a short position of State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bruce Fund and State Farm.

Diversification Opportunities for Bruce Fund and State Farm

0.82

Correlation Coefficient

Bruce Fund  State Farm

Very poor diversification

The 3 months correlation between Bruce and State is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bruce Fund Bruce and State Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm International and Bruce Fund 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 Bruce Fund Bruce 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 International has no effect on the direction of Bruce Fund i.e., Bruce Fund and State Farm go up and down completely randomly.

Pair Corralation between Bruce Fund and State Farm

Assuming the 90 days horizon Bruce Fund Bruce is expected to under-perform the State Farm. In addition to that, Bruce Fund is 1.61 times more volatile than State Farm International. It trades about -0.1 of its total potential returns per unit of risk. State Farm International is currently generating about -0.1 per unit of volatility. If you would invest  1,712  in State Farm International on September 17, 2024 and sell it today you would lose (35.00) from holding State Farm International or give up 2.04% of portfolio value over 90 days.

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

Bruce Fund Bruce  vs.  State Farm International

Bruce Fund Bruce

Risk-Adjusted Performance

0 of 100

Very Weak

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

State Farm International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bruce Fund and State Farm

The main advantage of trading using opposite Bruce Fund and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bruce Fund 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 Bruce Fund Bruce and State Farm International 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.