Correlation Between State Farm and Old Westbury
Can any of the company-specific risk be diversified away by investing in both State Farm and Old Westbury 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 Old Westbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Farm Growth and Old Westbury Small, you can compare the effects of market volatilities on State Farm and Old Westbury 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 Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Farm and Old Westbury.
Diversification Opportunities for State Farm and Old Westbury
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between State and Old is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding State Farm Growth and Old Westbury Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Small 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 Growth are associated (or correlated) with Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Small has no effect on the direction of State Farm i.e., State Farm and Old Westbury go up and down completely randomly.
Pair Corralation between State Farm and Old Westbury
Assuming the 90 days horizon State Farm Growth is expected to generate 0.68 times more return on investment than Old Westbury. However, State Farm Growth is 1.48 times less risky than Old Westbury. It trades about 0.25 of its potential returns per unit of risk. Old Westbury Small is currently generating about 0.08 per unit of risk. If you would invest 12,917 in State Farm Growth on September 13, 2024 and sell it today you would earn a total of 261.00 from holding State Farm Growth or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Farm Growth vs. Old Westbury Small
Performance |
| Timeline |
| State Farm Growth |
| Old Westbury Small |
State Farm and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Farm and Old Westbury
The main advantage of trading using opposite State Farm and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Farm position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.| State Farm vs. Old Westbury Small | State Farm vs. Ab Small Cap | State Farm vs. Lebenthal Lisanti Small | State Farm vs. Ab Small Cap |
| Old Westbury vs. Old Westbury All | Old Westbury vs. Old Westbury California | Old Westbury vs. Old Westbury Credit | Old Westbury vs. Old Westbury Fixed |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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