Correlation Between Allstate and Elmos Semiconductor

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

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

Diversification Opportunities for Allstate and Elmos Semiconductor

0.2

Correlation Coefficient

Allstate  Elmos Semiconductor

Modest diversification

The 3 months correlation between Allstate and Elmos is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Elmos Semiconductor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmos Semiconductor 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 Elmos Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmos Semiconductor has no effect on the direction of Allstate i.e., Allstate and Elmos Semiconductor go up and down completely randomly.

Pair Corralation between Allstate and Elmos Semiconductor

Assuming the 90 days horizon The Allstate is expected to generate 0.57 times more return on investment than Elmos Semiconductor. However, The Allstate is 1.76 times less risky than Elmos Semiconductor. It trades about 0.13 of its potential returns per unit of risk. Elmos Semiconductor SE is currently generating about -0.01 per unit of risk. If you would invest  14,516  in The Allstate on October 7, 2024 and sell it today you would earn a total of  4,204  from holding The Allstate or generate 28.96% return on investment over 90 days.

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

The Allstate  vs.  Elmos Semiconductor SE

Allstate

Risk-Adjusted Performance

7 of 100

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 nearly fragile basic indicators, Allstate may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Elmos Semiconductor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elmos Semiconductor SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Elmos Semiconductor may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Allstate and Elmos Semiconductor

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

The idea behind The Allstate and Elmos Semiconductor SE 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.