Correlation Between State Farm and Financials Ultrasector
Can any of the company-specific risk be diversified away by investing in both State Farm and Financials Ultrasector 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 Financials Ultrasector 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 Financials Ultrasector Profund, you can compare the effects of market volatilities on State Farm and Financials Ultrasector 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 Financials Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Farm and Financials Ultrasector.
Diversification Opportunities for State Farm and Financials Ultrasector
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and Financials is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding State Farm Balanced and Financials Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financials Ultrasector 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 Financials Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financials Ultrasector has no effect on the direction of State Farm i.e., State Farm and Financials Ultrasector go up and down completely randomly.
Pair Corralation between State Farm and Financials Ultrasector
Assuming the 90 days horizon State Farm is expected to generate 3.6 times less return on investment than Financials Ultrasector. But when comparing it to its historical volatility, State Farm Balanced is 2.81 times less risky than Financials Ultrasector. It trades about 0.13 of its potential returns per unit of risk. Financials Ultrasector Profund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,403 in Financials Ultrasector Profund on September 3, 2024 and sell it today you would earn a total of 1,227 from holding Financials Ultrasector Profund or generate 36.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Farm Balanced vs. Financials Ultrasector Profund
Performance |
| Timeline |
| State Farm Balanced |
| Financials Ultrasector |
State Farm and Financials Ultrasector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Farm and Financials Ultrasector
The main advantage of trading using opposite State Farm and Financials Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Farm position performs unexpectedly, Financials Ultrasector 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 Financials Ultrasector will offset losses from the drop in Financials Ultrasector's long position.| State Farm vs. T Rowe Price | State Farm vs. Jp Morgan Smartretirement | State Farm vs. T Rowe Price | State Farm vs. Franklin Lifesmart 2050 |
| Financials Ultrasector vs. American Century Etf | Financials Ultrasector vs. Boston Partners Small | Financials Ultrasector vs. Heartland Value Plus | Financials Ultrasector vs. Royce Opportunity Fund |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |