Correlation Between Clearbridge Energy and State Farm

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

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

Diversification Opportunities for Clearbridge Energy and State Farm

-0.29

Correlation Coefficient

Clearbridge Energy  State Farm

Very good diversification

The 3 months correlation between Clearbridge and State is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Clearbridge Energy Mlp and State Farm Interim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Interim and Clearbridge Energy 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 Clearbridge Energy Mlp 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 Interim has no effect on the direction of Clearbridge Energy i.e., Clearbridge Energy and State Farm go up and down completely randomly.

Pair Corralation between Clearbridge Energy and State Farm

Considering the 90-day investment horizon Clearbridge Energy Mlp is expected to generate 7.81 times more return on investment than State Farm. However, Clearbridge Energy is 7.81 times more volatile than State Farm Interim. It trades about 0.13 of its potential returns per unit of risk. State Farm Interim is currently generating about 0.07 per unit of risk. If you would invest  3,859  in Clearbridge Energy Mlp on October 7, 2024 and sell it today you would earn a total of  816.00  from holding Clearbridge Energy Mlp or generate 21.15% return on investment over 90 days.

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

Clearbridge Energy Mlp  vs.  State Farm Interim

Clearbridge Energy Mlp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Clearbridge Energy Mlp are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of very uncertain primary indicators, Clearbridge Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

State Farm Interim

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Farm Interim 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 Clearbridge Energy and State Farm

The main advantage of trading using opposite Clearbridge Energy and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearbridge Energy 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 Clearbridge Energy Mlp and State Farm Interim 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.