Correlation Between State Farm and Putnam Convertible

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

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

Diversification Opportunities for State Farm and Putnam Convertible

-0.66

Correlation Coefficient

State Farm  Putnam Convertible

Excellent diversification

The 3 months correlation between State and Putnam is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding State Farm Interim and Putnam Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Vertible Secu and State Farm 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 State Farm Interim are associated (or correlated) with Putnam Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Vertible Secu has no effect on the direction of State Farm i.e., State Farm and Putnam Convertible go up and down completely randomly.

Pair Corralation between State Farm and Putnam Convertible

Assuming the 90 days horizon State Farm Interim is expected to generate 0.2 times more return on investment than Putnam Convertible. However, State Farm Interim is 5.1 times less risky than Putnam Convertible. It trades about 0.22 of its potential returns per unit of risk. Putnam Vertible Securities is currently generating about -0.08 per unit of risk. If you would invest  947.00  in State Farm Interim on December 21, 2024 and sell it today you would earn a total of  19.00  from holding State Farm Interim or generate 2.01% return on investment over 90 days.

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

State Farm Interim  vs.  Putnam Vertible Securities

State Farm Interim

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in State Farm Interim are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. 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.

Putnam Vertible Secu

Risk-Adjusted Performance

Very Weak

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

Pair Trading with State Farm and Putnam Convertible

The main advantage of trading using opposite State Farm and Putnam Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Farm position performs unexpectedly, Putnam Convertible 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 Putnam Convertible will offset losses from the drop in Putnam Convertible's long position.

The idea behind State Farm Interim and Putnam Vertible Securities 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.