Correlation Between Bel Fuse and Allstate

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

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

Diversification Opportunities for Bel Fuse and Allstate

0.8

Correlation Coefficient

Bel Fuse  Allstate

Very poor diversification

The 3 months correlation between Bel and Allstate is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bel Fuse A and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Bel Fuse 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 Bel Fuse A 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 has no effect on the direction of Bel Fuse i.e., Bel Fuse and Allstate go up and down completely randomly.

Pair Corralation between Bel Fuse and Allstate

Assuming the 90 days horizon Bel Fuse A is expected to generate 4.61 times more return on investment than Allstate. However, Bel Fuse is 4.61 times more volatile than The Allstate. It trades about 0.11 of its potential returns per unit of risk. The Allstate is currently generating about 0.06 per unit of risk. If you would invest  8,644  in Bel Fuse A on September 4, 2024 and sell it today you would earn a total of  1,328  from holding Bel Fuse A or generate 15.36% return on investment over 90 days.

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

Bel Fuse A  vs.  The Allstate

Bel Fuse A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bel Fuse A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Bel Fuse sustained solid returns over the last few months and may actually be approaching a breakup point.

Allstate

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 4 (%) 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.

Pair Trading with Bel Fuse and Allstate

The main advantage of trading using opposite Bel Fuse and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bel Fuse 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 Bel Fuse A and The Allstate 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.