Correlation Between Aam Select and State Farm
Can any of the company-specific risk be diversified away by investing in both Aam Select 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 Aam Select and State Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aam Select Income and State Farm Municipal, you can compare the effects of market volatilities on Aam Select 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 Aam Select with a short position of State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aam Select and State Farm.
Diversification Opportunities for Aam Select and State Farm
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aam and State is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Aam Select Income and State Farm Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Municipal and Aam Select 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 Aam Select Income 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 Municipal has no effect on the direction of Aam Select i.e., Aam Select and State Farm go up and down completely randomly.
Pair Corralation between Aam Select and State Farm
Assuming the 90 days horizon Aam Select Income is expected to generate 2.06 times more return on investment than State Farm. However, Aam Select is 2.06 times more volatile than State Farm Municipal. It trades about 0.05 of its potential returns per unit of risk. State Farm Municipal is currently generating about 0.07 per unit of risk. If you would invest 848.00 in Aam Select Income on September 3, 2024 and sell it today you would earn a total of 81.00 from holding Aam Select Income or generate 9.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aam Select Income vs. State Farm Municipal
Performance |
| Timeline |
| Aam Select Income |
| State Farm Municipal |
Aam Select and State Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aam Select and State Farm
The main advantage of trading using opposite Aam Select and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aam Select 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.| Aam Select vs. Needham Aggressive Growth | Aam Select vs. Western Asset High | Aam Select vs. Gmo High Yield | Aam Select vs. Nuveen High Income |
| State Farm vs. Aam Select Income | State Farm vs. Rbc Microcap Value | State Farm vs. Volumetric Fund Volumetric | State Farm vs. Fa 529 Aggressive |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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