Correlation Between NYSE Composite and State Farm
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and State Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and State Farm International, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and State Farm.
Diversification Opportunities for NYSE Composite and State Farm
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between NYSE and State is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and State Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm International and NYSE Composite 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 NYSE Composite 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 International has no effect on the direction of NYSE Composite i.e., NYSE Composite and State Farm go up and down completely randomly.
Pair Corralation between NYSE Composite and State Farm
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.19 times more return on investment than State Farm. However, NYSE Composite is 2.19 times more volatile than State Farm International. It trades about 0.23 of its potential returns per unit of risk. State Farm International is currently generating about 0.05 per unit of risk. If you would invest 1,954,967 in NYSE Composite on August 29, 2024 and sell it today you would earn a total of 66,978 from holding NYSE Composite or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. State Farm International
Performance |
| Timeline |
NYSE Composite and State Farm Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
State Farm International
Pair trading matchups for State Farm
Pair Trading with NYSE Composite and State Farm
The main advantage of trading using opposite NYSE Composite and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Sphere Entertainment Co | NYSE Composite vs. Weibo Corp | NYSE Composite vs. BCE Inc | NYSE Composite vs. Pinterest |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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