Correlation Between Garmin and ALLSTATE

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

By analyzing existing cross correlation between Garmin and ALLSTATE P 328, you can compare the effects of market volatilities on Garmin 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 Garmin with a short position of ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Garmin and ALLSTATE.

Diversification Opportunities for Garmin and ALLSTATE

-0.28

Correlation Coefficient

Garmin  ALLSTATE

Very good diversification

The 3 months correlation between Garmin and ALLSTATE is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Garmin and ALLSTATE P 328 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE P 328 and Garmin 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 Garmin 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 328 has no effect on the direction of Garmin i.e., Garmin and ALLSTATE go up and down completely randomly.

Pair Corralation between Garmin and ALLSTATE

Given the investment horizon of 90 days Garmin is expected to generate 9.18 times more return on investment than ALLSTATE. However, Garmin is 9.18 times more volatile than ALLSTATE P 328. It trades about 0.09 of its potential returns per unit of risk. ALLSTATE P 328 is currently generating about 0.02 per unit of risk. If you would invest  14,429  in Garmin on October 8, 2024 and sell it today you would earn a total of  6,354  from holding Garmin or generate 44.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.72%
Values	Daily Returns

Garmin  vs.  ALLSTATE P 328

Garmin

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Garmin displayed solid returns over the last few months and may actually be approaching a breakup point.

ALLSTATE P 328

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALLSTATE P 328 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALLSTATE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Garmin and ALLSTATE

The main advantage of trading using opposite Garmin and ALLSTATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garmin 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 Garmin and ALLSTATE P 328 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.