Correlation Between All Asset and State Farm
Can any of the company-specific risk be diversified away by investing in both All Asset 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 All Asset and State Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between All Asset Fund and State Farm International, you can compare the effects of market volatilities on All Asset 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 All Asset with a short position of State Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of All Asset and State Farm.
Diversification Opportunities for All Asset and State Farm
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between All and State is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding All Asset Fund 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 All Asset 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 All Asset 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 International has no effect on the direction of All Asset i.e., All Asset and State Farm go up and down completely randomly.
Pair Corralation between All Asset and State Farm
Assuming the 90 days horizon All Asset is expected to generate 1.65 times less return on investment than State Farm. But when comparing it to its historical volatility, All Asset Fund is 1.49 times less risky than State Farm. It trades about 0.07 of its potential returns per unit of risk. State Farm International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,540 in State Farm International on August 25, 2024 and sell it today you would earn a total of 137.00 from holding State Farm International or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
All Asset Fund vs. State Farm International
Performance |
| Timeline |
| All Asset Fund |
| State Farm International |
All Asset and State Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with All Asset and State Farm
The main advantage of trading using opposite All Asset and State Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if All Asset 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.| All Asset vs. Dws Government Money | All Asset vs. Morningstar Defensive Bond | All Asset vs. Nuveen All American Municipal | All Asset vs. Franklin High Yield |
| State Farm vs. State Farm Growth | State Farm vs. State Farm Balanced | State Farm vs. State Farm Municipal | State Farm vs. State Farm Interim |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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