Correlation Between Global Gold and State Farm

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Can any of the company-specific risk be diversified away by investing in both Global Gold 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 Global Gold and State Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Gold Fund and State Farm Balanced, you can compare the effects of market volatilities on Global Gold 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 Global Gold with a short position of State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and State Farm.

Diversification Opportunities for Global Gold and State Farm

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between Global and State is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and State Farm Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Balanced and Global Gold 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 Global Gold Fund 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 Balanced has no effect on the direction of Global Gold i.e., Global Gold and State Farm go up and down completely randomly.

Pair Corralation between Global Gold and State Farm

Assuming the 90 days horizon Global Gold Fund is expected to generate 3.39 times more return on investment than State Farm. However, Global Gold is 3.39 times more volatile than State Farm Balanced. It trades about 0.04 of its potential returns per unit of risk. State Farm Balanced is currently generating about 0.12 per unit of risk. If you would invest  985.00  in Global Gold Fund on September 14, 2024 and sell it today you would earn a total of  348.00  from holding Global Gold Fund or generate 35.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Global Gold Fund  vs.  State Farm Balanced

 Performance 
       Timeline  
Global Gold Fund 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in State Farm Balanced are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. 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.

Global Gold and State Farm Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global Gold and State Farm

The main advantage of trading using opposite Global Gold and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold 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 Global Gold Fund and State Farm Balanced 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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