Correlation Between Cisco Systems and ALLSTATE

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

By analyzing existing cross correlation between Cisco Systems and ALLSTATE P 42, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and ALLSTATE.

Diversification Opportunities for Cisco Systems and ALLSTATE

-0.8

Correlation Coefficient

Cisco Systems  ALLSTATE

Pay attention - limited upside

The 3 months correlation between Cisco and ALLSTATE is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and ALLSTATE P 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE P 42 and Cisco Systems 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 Cisco Systems 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 42 has no effect on the direction of Cisco Systems i.e., Cisco Systems and ALLSTATE go up and down completely randomly.

Pair Corralation between Cisco Systems and ALLSTATE

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.36 times more return on investment than ALLSTATE. However, Cisco Systems is 2.78 times less risky than ALLSTATE. It trades about 0.2 of its potential returns per unit of risk. ALLSTATE P 42 is currently generating about -0.07 per unit of risk. If you would invest  5,215  in Cisco Systems on October 7, 2024 and sell it today you would earn a total of  671.00  from holding Cisco Systems or generate 12.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	69.84%
Values	Daily Returns

Cisco Systems  vs.  ALLSTATE P 42

Cisco Systems

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ALLSTATE P 42

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days ALLSTATE P 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for ALLSTATE P 42 investors.

Pair Trading with Cisco Systems and ALLSTATE

The main advantage of trading using opposite Cisco Systems and ALLSTATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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 Cisco Systems and ALLSTATE P 42 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.