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 PASUX 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 Price is expected to generate 1.38 times more return on investment than State Farm. However, T Rowe is 1.38 times more volatile than State Farm Balanced. It trades about 0.09 of its potential returns per unit of risk. State Farm Balanced is currently generating about 0.11 per unit of risk. If you would invest 978.00 in T Rowe Price on September 4, 2024 and sell it today you would earn a total of 376.00 from holding T Rowe Price or generate 38.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| 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.The idea behind T Rowe Price 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.| 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |