Correlation Between State Farm and Franklin Lifesmart
Can any of the company-specific risk be diversified away by investing in both State Farm and Franklin Lifesmart 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 Franklin Lifesmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Farm Balanced and Franklin Lifesmart 2050, you can compare the effects of market volatilities on State Farm and Franklin Lifesmart 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 Franklin Lifesmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Farm and Franklin Lifesmart.
Diversification Opportunities for State Farm and Franklin Lifesmart
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between State and FRANKLIN is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding State Farm Balanced and Franklin Lifesmart 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Lifesmart 2050 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 Balanced are associated (or correlated) with Franklin Lifesmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Lifesmart 2050 has no effect on the direction of State Farm i.e., State Farm and Franklin Lifesmart go up and down completely randomly.
Pair Corralation between State Farm and Franklin Lifesmart
Assuming the 90 days horizon State Farm is expected to generate 1.14 times less return on investment than Franklin Lifesmart. But when comparing it to its historical volatility, State Farm Balanced is 1.36 times less risky than Franklin Lifesmart. It trades about 0.12 of its potential returns per unit of risk. Franklin Lifesmart 2050 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,141 in Franklin Lifesmart 2050 on September 5, 2024 and sell it today you would earn a total of 475.00 from holding Franklin Lifesmart 2050 or generate 41.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Farm Balanced vs. Franklin Lifesmart 2050
Performance |
| Timeline |
| State Farm Balanced |
| Franklin Lifesmart 2050 |
State Farm and Franklin Lifesmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Farm and Franklin Lifesmart
The main advantage of trading using opposite State Farm and Franklin Lifesmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Farm position performs unexpectedly, Franklin Lifesmart 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 Franklin Lifesmart will offset losses from the drop in Franklin Lifesmart's long position.| State Farm vs. Artisan Thematic Fund | State Farm vs. Vanguard Windsor Fund | State Farm vs. Qs Growth Fund | State Farm vs. Eic Value Fund |
| Franklin Lifesmart vs. Qs Moderate Growth | Franklin Lifesmart vs. T Rowe Price | Franklin Lifesmart vs. T Rowe Price | Franklin Lifesmart vs. Virtus Dfa 2040 |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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