Correlation Between Air Transport and ALLSTATE

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

By analyzing existing cross correlation between Air Transport Services and ALLSTATE P 555, you can compare the effects of market volatilities on Air Transport and ALLSTATE 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 Air Transport with a short position of ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and ALLSTATE.

Diversification Opportunities for Air Transport and ALLSTATE

-0.08

Correlation Coefficient

Air Transport  ALLSTATE

Good diversification

The 3 months correlation between Air and ALLSTATE is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and ALLSTATE P 555 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE P 555 and Air Transport 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 Air Transport Services are associated (or correlated) with ALLSTATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLSTATE P 555 has no effect on the direction of Air Transport i.e., Air Transport and ALLSTATE go up and down completely randomly.

Pair Corralation between Air Transport and ALLSTATE

Given the investment horizon of 90 days Air Transport is expected to generate 454.69 times less return on investment than ALLSTATE. But when comparing it to its historical volatility, Air Transport Services is 16.16 times less risky than ALLSTATE. It trades about 0.0 of its potential returns per unit of risk. ALLSTATE P 555 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  10,521  in ALLSTATE P 555 on October 25, 2024 and sell it today you would lose (236.00) from holding ALLSTATE P 555 or give up 2.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.29%
Values	Daily Returns

Air Transport Services  vs.  ALLSTATE P 555

Air Transport Services

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

ALLSTATE P 555

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALLSTATE P 555 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALLSTATE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Air Transport and ALLSTATE

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

The idea behind Air Transport Services and ALLSTATE P 555 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.