Correlation Between Cambiar Opportunity and State Farm

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

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

Diversification Opportunities for Cambiar Opportunity and State Farm

0.93

Correlation Coefficient

Cambiar Opportunity  State Farm

Almost no diversification

The 3 months correlation between Cambiar and State is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Cambiar Opportunity Fund 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 Cambiar Opportunity 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 Cambiar Opportunity Fund 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 Cambiar Opportunity i.e., Cambiar Opportunity and State Farm go up and down completely randomly.

Pair Corralation between Cambiar Opportunity and State Farm

Assuming the 90 days horizon Cambiar Opportunity is expected to generate 1.02 times less return on investment than State Farm. In addition to that, Cambiar Opportunity is 1.58 times more volatile than State Farm Balanced. It trades about 0.03 of its total potential returns per unit of risk. State Farm Balanced is currently generating about 0.05 per unit of volatility. If you would invest  9,702  in State Farm Balanced on September 16, 2024 and sell it today you would earn a total of  84.00  from holding State Farm Balanced or generate 0.87% return on investment over 90 days.

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

Cambiar Opportunity Fund  vs.  State Farm Balanced

Cambiar Opportunity

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cambiar Opportunity Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Cambiar Opportunity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

State Farm Balanced

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Farm Balanced are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, 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 Cambiar Opportunity and State Farm

The main advantage of trading using opposite Cambiar Opportunity and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambiar Opportunity 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 Cambiar Opportunity Fund and State Farm Balanced 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.