Correlation Between Kaiser Aluminum and ALLSTATE

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

By analyzing existing cross correlation between Kaiser Aluminum and ALLSTATE P 555, you can compare the effects of market volatilities on Kaiser Aluminum 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 Kaiser Aluminum with a short position of ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and ALLSTATE.

Diversification Opportunities for Kaiser Aluminum and ALLSTATE

0.13

Correlation Coefficient

Kaiser Aluminum  ALLSTATE

Average diversification

The 3 months correlation between Kaiser and ALLSTATE is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and ALLSTATE P 555 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE P 555 and Kaiser Aluminum 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 Kaiser Aluminum 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 555 has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and ALLSTATE go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and ALLSTATE

Given the investment horizon of 90 days Kaiser Aluminum is expected to under-perform the ALLSTATE. In addition to that, Kaiser Aluminum is 1.2 times more volatile than ALLSTATE P 555. It trades about -0.01 of its total potential returns per unit of risk. ALLSTATE P 555 is currently generating about 0.05 per unit of volatility. If you would invest  10,142  in ALLSTATE P 555 on December 24, 2024 and sell it today you would earn a total of  395.00  from holding ALLSTATE P 555 or generate 3.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

Kaiser Aluminum  vs.  ALLSTATE P 555

Kaiser Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ALLSTATE P 555

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALLSTATE P 555 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ALLSTATE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kaiser Aluminum and ALLSTATE

The main advantage of trading using opposite Kaiser Aluminum and ALLSTATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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 Kaiser Aluminum and ALLSTATE P 555 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .