Correlation Between Allstate and Pembina Pipeline

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

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

Diversification Opportunities for Allstate and Pembina Pipeline

0.51

Correlation Coefficient

Allstate  Pembina Pipeline

Very weak diversification

The 3 months correlation between Allstate and Pembina is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Pembina Pipeline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline has no effect on the direction of Allstate i.e., Allstate and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Allstate and Pembina Pipeline

Considering the 90-day investment horizon The Allstate is expected to generate 9.19 times more return on investment than Pembina Pipeline. However, Allstate is 9.19 times more volatile than Pembina Pipeline. It trades about 0.09 of its potential returns per unit of risk. Pembina Pipeline is currently generating about 0.08 per unit of risk. If you would invest  19,267  in The Allstate on December 21, 2024 and sell it today you would earn a total of  1,751  from holding The Allstate or generate 9.09% return on investment over 90 days.

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

The Allstate  vs.  Pembina Pipeline

Allstate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Allstate may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pembina Pipeline

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pembina Pipeline are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Pembina Pipeline is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Allstate and Pembina Pipeline

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

The idea behind The Allstate and Pembina Pipeline 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.