Correlation Between State Farm and State Farm

Can any of the company-specific risk be diversified away by investing in both State Farm 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 State Farm and State Farm 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 State Farm Interim, you can compare the effects of market volatilities on State Farm 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 State Farm with a short position of State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Farm and State Farm.

Diversification Opportunities for State Farm and State Farm

-0.38

Correlation Coefficient

State Farm  State Farm

Very good diversification

The 3 months correlation between State and State is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding State Farm Balanced and State Farm Interim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Interim 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 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 Interim has no effect on the direction of State Farm i.e., State Farm and State Farm go up and down completely randomly.

Pair Corralation between State Farm and State Farm

Assuming the 90 days horizon State Farm Balanced is expected to under-perform the State Farm. In addition to that, State Farm is 3.9 times more volatile than State Farm Interim. It trades about -0.05 of its total potential returns per unit of risk. State Farm Interim is currently generating about 0.19 per unit of volatility. If you would invest  947.00  in State Farm Interim on December 27, 2024 and sell it today you would earn a total of  17.00  from holding State Farm Interim or generate 1.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

State Farm Balanced  vs.  State Farm Interim

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.

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 14 (%) 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.

Pair Trading with State Farm and State Farm

The main advantage of trading using opposite State Farm and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Farm 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 State Farm Balanced and State Farm Interim 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.