Correlation Between Allstate and Semtech

Can any of the company-specific risk be diversified away by investing in both Allstate and Semtech 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 Allstate and Semtech into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Allstate and Semtech, you can compare the effects of market volatilities on Allstate and Semtech 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 Allstate with a short position of Semtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Semtech.

Diversification Opportunities for Allstate and Semtech

-0.18

Correlation Coefficient

Allstate  Semtech

Good diversification

The 3 months correlation between Allstate and Semtech is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Semtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semtech and Allstate 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 The Allstate are associated (or correlated) with Semtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semtech has no effect on the direction of Allstate i.e., Allstate and Semtech go up and down completely randomly.

Pair Corralation between Allstate and Semtech

Assuming the 90 days trading horizon The Allstate is expected to under-perform the Semtech. But the preferred stock apears to be less risky and, when comparing its historical volatility, The Allstate is 8.72 times less risky than Semtech. The preferred stock trades about -0.11 of its potential returns per unit of risk. The Semtech is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  4,392  in Semtech on September 5, 2024 and sell it today you would earn a total of  2,303  from holding Semtech or generate 52.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Allstate  vs.  Semtech

Allstate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady essential indicators, Allstate is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Semtech

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Semtech are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Semtech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allstate and Semtech

The main advantage of trading using opposite Allstate and Semtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, Semtech 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 Semtech will offset losses from the drop in Semtech's long position.

The idea behind The Allstate and Semtech 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.