Correlation Between State Farm and State Street

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

Diversification Opportunities for State Farm and State Street

0.0

Correlation Coefficient

State Farm  State Street

Pay attention - limited upside

The 3 months correlation between State and State is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding State Farm Balanced and State Street Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Institu 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 Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Institu has no effect on the direction of State Farm i.e., State Farm and State Street go up and down completely randomly.

Pair Corralation between State Farm and State Street

If you would invest (100.00) in State Street Institutional on October 23, 2024 and sell it today you would earn a total of  100.00  from holding State Street Institutional or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

State Farm Balanced  vs.  State Street Institutional

State Farm Balanced

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Fund's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

State Street Institu

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind State Farm Balanced and State Street Institutional 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.