Correlation Between State Farm and Clough Global

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

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

Diversification Opportunities for State Farm and Clough Global

0.88

Correlation Coefficient

State Farm  Clough Global

Very poor diversification

The 3 months correlation between State and Clough is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding State Farm Growth and Clough Global Ef in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clough Global Ef 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 Growth are associated (or correlated) with Clough Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clough Global Ef has no effect on the direction of State Farm i.e., State Farm and Clough Global go up and down completely randomly.

Pair Corralation between State Farm and Clough Global

Assuming the 90 days horizon State Farm Growth is expected to under-perform the Clough Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, State Farm Growth is 1.09 times less risky than Clough Global. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Clough Global Ef is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  645.00  in Clough Global Ef on December 28, 2024 and sell it today you would lose (6.00) from holding Clough Global Ef or give up 0.93% of portfolio value over 90 days.

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

State Farm Growth  vs.  Clough Global Ef

State Farm Growth

Risk-Adjusted Performance

Very Weak

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

Clough Global Ef

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clough Global Ef has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable essential indicators, Clough Global is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with State Farm and Clough Global

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

The idea behind State Farm Growth and Clough Global Ef 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.