Correlation Between Dime Community and Allstate

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

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

Diversification Opportunities for Dime Community and Allstate

0.49

Correlation Coefficient

Dime Community  Allstate

Very weak diversification

The 3 months correlation between Dime and Allstate is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dime Community Bancshares and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Dime Community 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 Dime Community Bancshares 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 Dime Community i.e., Dime Community and Allstate go up and down completely randomly.

Pair Corralation between Dime Community and Allstate

Assuming the 90 days horizon Dime Community is expected to generate 10.21 times less return on investment than Allstate. In addition to that, Dime Community is 1.19 times more volatile than The Allstate. It trades about 0.0 of its total potential returns per unit of risk. The Allstate is currently generating about 0.03 per unit of volatility. If you would invest  2,200  in The Allstate on December 4, 2024 and sell it today you would earn a total of  30.00  from holding The Allstate or generate 1.36% return on investment over 90 days.

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

Dime Community Bancshares  vs.  The Allstate

Dime Community Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dime Community Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Dime Community is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Allstate

Risk-Adjusted Performance

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 fairly strong essential indicators, Allstate is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Dime Community and Allstate

The main advantage of trading using opposite Dime Community and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dime Community 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 Dime Community Bancshares 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.