Correlation Between T Rowe and State Farm
Can any of the company-specific risk be diversified away by investing in both T Rowe 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 T Rowe and State Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between T Rowe Price and State Farm Balanced, you can compare the effects of market volatilities on T Rowe 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 T Rowe with a short position of State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and State Farm.
Diversification Opportunities for T Rowe and State Farm
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PARJX and State is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price 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 T Rowe 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 T Rowe Price 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 T Rowe i.e., T Rowe and State Farm go up and down completely randomly.
Pair Corralation between T Rowe and State Farm
Assuming the 90 days horizon T Rowe is expected to generate 1.62 times less return on investment than State Farm. But when comparing it to its historical volatility, T Rowe Price is 1.18 times less risky than State Farm. It trades about 0.35 of its potential returns per unit of risk. State Farm Balanced is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 9,477 in State Farm Balanced on September 4, 2024 and sell it today you would earn a total of 407.00 from holding State Farm Balanced or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
T Rowe Price vs. State Farm Balanced
Performance |
| Timeline |
| T Rowe Price |
| State Farm Balanced |
T Rowe and State Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with T Rowe and State Farm
The main advantage of trading using opposite T Rowe and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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.| T Rowe vs. T Rowe Price | T Rowe vs. T Rowe Price | T Rowe vs. T Rowe Price | T Rowe vs. Trowe Price Retirement |
| State Farm vs. Franklin Lifesmart 2050 | State Farm vs. T Rowe Price | State Farm vs. T Rowe Price | State Farm vs. T Rowe Price |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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