Correlation Between State Farm and Blackrock

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

By analyzing existing cross correlation between State Farm Balanced and Blackrock Pa Muni, you can compare the effects of market volatilities on State Farm and Blackrock 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 Blackrock. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Farm and Blackrock.

Diversification Opportunities for State Farm and Blackrock

0.03

Correlation Coefficient

State Farm  Blackrock

Significant diversification

The 3 months correlation between State and Blackrock is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding State Farm Balanced and Blackrock Pa Muni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Pa Muni 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 Balanced are associated (or correlated) with Blackrock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Pa Muni has no effect on the direction of State Farm i.e., State Farm and Blackrock go up and down completely randomly.

Pair Corralation between State Farm and Blackrock

Assuming the 90 days horizon State Farm Balanced is expected to under-perform the Blackrock. In addition to that, State Farm is 2.1 times more volatile than Blackrock Pa Muni. It trades about -0.07 of its total potential returns per unit of risk. Blackrock Pa Muni is currently generating about 0.0 per unit of volatility. If you would invest  975.00  in Blackrock Pa Muni on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Blackrock Pa Muni or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

State Farm Balanced  vs.  Blackrock Pa Muni

State Farm Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Farm Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, State Farm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Pa Muni

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Pa Muni has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Blackrock 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 Blackrock

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

The idea behind State Farm Balanced and Blackrock Pa Muni 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.