Correlation Between CDL INVESTMENT and Allstate

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

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

Diversification Opportunities for CDL INVESTMENT and Allstate

0.25

Correlation Coefficient

CDL INVESTMENT  Allstate

Modest diversification

The 3 months correlation between CDL and Allstate is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding CDL INVESTMENT and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and CDL INVESTMENT 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 CDL INVESTMENT 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 CDL INVESTMENT i.e., CDL INVESTMENT and Allstate go up and down completely randomly.

Pair Corralation between CDL INVESTMENT and Allstate

Assuming the 90 days trading horizon CDL INVESTMENT is expected to under-perform the Allstate. But the stock apears to be less risky and, when comparing its historical volatility, CDL INVESTMENT is 1.1 times less risky than Allstate. The stock trades about -0.05 of its potential returns per unit of risk. The The Allstate is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  18,069  in The Allstate on December 20, 2024 and sell it today you would earn a total of  1,016  from holding The Allstate or generate 5.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

CDL INVESTMENT  vs.  The Allstate

CDL INVESTMENT

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDL INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CDL INVESTMENT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Allstate

Risk-Adjusted Performance

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

Pair Trading with CDL INVESTMENT and Allstate

The main advantage of trading using opposite CDL INVESTMENT and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDL INVESTMENT 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 CDL INVESTMENT 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.