Correlation Between State Farm and One Choice

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Can any of the company-specific risk be diversified away by investing in both State Farm and One Choice 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 One Choice 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 One Choice In, you can compare the effects of market volatilities on State Farm and One Choice 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 One Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Farm and One Choice.

Diversification Opportunities for State Farm and One Choice

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between State and One is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding STATE FARM GROWTH and ONE CHOICE IN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Choice In 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 One Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Choice In has no effect on the direction of State Farm i.e., State Farm and One Choice go up and down completely randomly.

Pair Corralation between State Farm and One Choice

Assuming the 90 days horizon State Farm Growth is expected to generate 1.59 times more return on investment than One Choice. However, State Farm is 1.59 times more volatile than One Choice In. It trades about 0.3 of its potential returns per unit of risk. One Choice In is currently generating about 0.11 per unit of risk. If you would invest  10,847  in State Farm Growth on December 3, 2023 and sell it today you would earn a total of  445.00  from holding State Farm Growth or generate 4.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

STATE FARM GROWTH  vs.  ONE CHOICE IN

 Performance 
       Timeline  
State Farm Growth 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in State Farm Growth are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, State Farm is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
One Choice In 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in One Choice In are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, One Choice is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

State Farm and One Choice Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with State Farm and One Choice

The main advantage of trading using opposite State Farm and One Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Farm position performs unexpectedly, One Choice 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 One Choice will offset losses from the drop in One Choice's long position.
The idea behind State Farm Growth and One Choice In pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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