Correlation Between State Farm and T Rowe
Can any of the company-specific risk be diversified away by investing in both State Farm and T Rowe 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 State Farm and T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Farm International and T Rowe Price, you can compare the effects of market volatilities on State Farm and T Rowe 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 State Farm with a short position of T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Farm and T Rowe.
Diversification Opportunities for State Farm and T Rowe
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between State and PRINX is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding State Farm International and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price and State Farm 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 State Farm International are associated (or correlated) with T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of State Farm i.e., State Farm and T Rowe go up and down completely randomly.
Pair Corralation between State Farm and T Rowe
Assuming the 90 days horizon State Farm is expected to generate 2.73 times less return on investment than T Rowe. In addition to that, State Farm is 1.1 times more volatile than T Rowe Price. It trades about 0.12 of its total potential returns per unit of risk. T Rowe Price is currently generating about 0.37 per unit of volatility. If you would invest 1,132 in T Rowe Price on September 13, 2024 and sell it today you would earn a total of 13.00 from holding T Rowe Price or generate 1.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Farm International vs. T Rowe Price
Performance |
| Timeline |
| State Farm International |
| T Rowe Price |
State Farm and T Rowe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Farm and T Rowe
The main advantage of trading using opposite State Farm and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Farm position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.| State Farm vs. Voya High Yield | State Farm vs. Siit High Yield | State Farm vs. Blackrock High Yield | State Farm vs. Gmo High Yield |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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