Correlation Between Franklin Resources and Allstate

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

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

Diversification Opportunities for Franklin Resources and Allstate

0.81

Correlation Coefficient

Franklin Resources  Allstate

Very poor diversification

The 3 months correlation between Franklin and Allstate is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Resources and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Franklin Resources 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 Franklin Resources 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 Franklin Resources i.e., Franklin Resources and Allstate go up and down completely randomly.

Pair Corralation between Franklin Resources and Allstate

Considering the 90-day investment horizon Franklin Resources is expected to under-perform the Allstate. In addition to that, Franklin Resources is 1.51 times more volatile than The Allstate. It trades about -0.26 of its total potential returns per unit of risk. The Allstate is currently generating about -0.28 per unit of volatility. If you would invest  20,739  in The Allstate on September 29, 2024 and sell it today you would lose (1,359) from holding The Allstate or give up 6.55% of portfolio value over 90 days.

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

Franklin Resources  vs.  The Allstate

Franklin Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Franklin Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Allstate

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Allstate is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Franklin Resources and Allstate

The main advantage of trading using opposite Franklin Resources and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Resources 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 Franklin Resources 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.