Correlation Between State Farm and Prudential Jennison
Can any of the company-specific risk be diversified away by investing in both State Farm and Prudential Jennison 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 Prudential Jennison 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 Prudential Jennison International, you can compare the effects of market volatilities on State Farm and Prudential Jennison 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 Prudential Jennison. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Farm and Prudential Jennison.
Diversification Opportunities for State Farm and Prudential Jennison
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between State and Prudential is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding State Farm Growth and Prudential Jennison Internatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Jennison 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 Prudential Jennison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Jennison has no effect on the direction of State Farm i.e., State Farm and Prudential Jennison go up and down completely randomly.
Pair Corralation between State Farm and Prudential Jennison
Assuming the 90 days horizon State Farm Growth is expected to generate 0.76 times more return on investment than Prudential Jennison. However, State Farm Growth is 1.32 times less risky than Prudential Jennison. It trades about 0.1 of its potential returns per unit of risk. Prudential Jennison International is currently generating about 0.04 per unit of risk. If you would invest 9,723 in State Farm Growth on August 26, 2024 and sell it today you would earn a total of 3,245 from holding State Farm Growth or generate 33.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Farm Growth vs. Prudential Jennison Internatio
Performance |
| Timeline |
| State Farm Growth |
| Prudential Jennison |
State Farm and Prudential Jennison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Farm and Prudential Jennison
The main advantage of trading using opposite State Farm and Prudential Jennison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Farm position performs unexpectedly, Prudential Jennison 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 Prudential Jennison will offset losses from the drop in Prudential Jennison's long position.| State Farm vs. Pgim Conservative Retirement | State Farm vs. American Funds Conservative | State Farm vs. Aqr Diversified Arbitrage | State Farm vs. Evaluator Conservative Rms |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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