Correlation Between State Farm and Pioneer Amt-free

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

By analyzing existing cross correlation between State Farm International and Pioneer Amt Free Municipal, you can compare the effects of market volatilities on State Farm and Pioneer Amt-free 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 Pioneer Amt-free. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Farm and Pioneer Amt-free.

Diversification Opportunities for State Farm and Pioneer Amt-free

0.35

Correlation Coefficient

State Farm  Pioneer Amt-free

Weak diversification

The 3 months correlation between STATE and Pioneer is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding State Farm International and Pioneer Amt Free Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Amt Free 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 International are associated (or correlated) with Pioneer Amt-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Amt Free has no effect on the direction of State Farm i.e., State Farm and Pioneer Amt-free go up and down completely randomly.

Pair Corralation between State Farm and Pioneer Amt-free

Assuming the 90 days horizon State Farm International is expected to generate 0.64 times more return on investment than Pioneer Amt-free. However, State Farm International is 1.56 times less risky than Pioneer Amt-free. It trades about 0.03 of its potential returns per unit of risk. Pioneer Amt Free Municipal is currently generating about -0.02 per unit of risk. If you would invest  1,634  in State Farm International on December 21, 2024 and sell it today you would earn a total of  7.00  from holding State Farm International or generate 0.43% return on investment over 90 days.

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

State Farm International  vs.  Pioneer Amt Free Municipal

State Farm International

Risk-Adjusted Performance

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.

Pioneer Amt Free

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pioneer Amt Free Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Pioneer Amt-free 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 Pioneer Amt-free

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

The idea behind State Farm International and Pioneer Amt Free 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.