Correlation Between Fidelity Select and State Farm

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

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

Diversification Opportunities for Fidelity Select and State Farm

0.36

Correlation Coefficient

Fidelity Select  State Farm

Weak diversification

The 3 months correlation between Fidelity and State is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Select Semiconductors 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 Fidelity Select 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 Fidelity Select Semiconductors 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 Fidelity Select i.e., Fidelity Select and State Farm go up and down completely randomly.

Pair Corralation between Fidelity Select and State Farm

Assuming the 90 days horizon Fidelity Select Semiconductors is expected to under-perform the State Farm. In addition to that, Fidelity Select is 10.33 times more volatile than State Farm International. It trades about -0.09 of its total potential returns per unit of risk. State Farm International is currently generating about -0.04 per unit of volatility. If you would invest  1,636  in State Farm International on December 28, 2024 and sell it today you would lose (11.00) from holding State Farm International or give up 0.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Fidelity Select Semiconductors  vs.  State Farm International

Fidelity Select Semi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Select Semiconductors has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

State Farm International

Risk-Adjusted Performance

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 Fidelity Select and State Farm

The main advantage of trading using opposite Fidelity Select and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Select 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 Fidelity Select Semiconductors 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.