Correlation Between Alphacentric Lifesci and State Farm

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

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

Diversification Opportunities for Alphacentric Lifesci and State Farm

-0.07

Correlation Coefficient

Alphacentric Lifesci  State Farm

Good diversification

The 3 months correlation between Alphacentric and State is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Alphacentric Lifesci Healthcar and State Farm Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Municipal and Alphacentric Lifesci 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 Alphacentric Lifesci Healthcare 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 Municipal has no effect on the direction of Alphacentric Lifesci i.e., Alphacentric Lifesci and State Farm go up and down completely randomly.

Pair Corralation between Alphacentric Lifesci and State Farm

Assuming the 90 days horizon Alphacentric Lifesci Healthcare is expected to under-perform the State Farm. In addition to that, Alphacentric Lifesci is 4.2 times more volatile than State Farm Municipal. It trades about -0.15 of its total potential returns per unit of risk. State Farm Municipal is currently generating about -0.04 per unit of volatility. If you would invest  818.00  in State Farm Municipal on September 17, 2024 and sell it today you would lose (4.00) from holding State Farm Municipal or give up 0.49% of portfolio value over 90 days.

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

Alphacentric Lifesci Healthcar  vs.  State Farm Municipal

Alphacentric Lifesci

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alphacentric Lifesci Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

State Farm Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Farm Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong 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.

Pair Trading with Alphacentric Lifesci and State Farm

The main advantage of trading using opposite Alphacentric Lifesci and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphacentric Lifesci 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 Alphacentric Lifesci Healthcare and State Farm Municipal 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 Global Correlations module to find global opportunities by holding instruments from different markets.