Correlation Between Lemonade and Allstate

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

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

Diversification Opportunities for Lemonade and Allstate

-0.36

Correlation Coefficient

Lemonade  Allstate

Very good diversification

The 3 months correlation between Lemonade and Allstate is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lemonade and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Lemonade 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 Lemonade 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 Lemonade i.e., Lemonade and Allstate go up and down completely randomly.

Pair Corralation between Lemonade and Allstate

Given the investment horizon of 90 days Lemonade is expected to generate 12.32 times more return on investment than Allstate. However, Lemonade is 12.32 times more volatile than The Allstate. It trades about 0.3 of its potential returns per unit of risk. The Allstate is currently generating about 0.08 per unit of risk. If you would invest  1,833  in Lemonade on September 2, 2024 and sell it today you would earn a total of  3,348  from holding Lemonade or generate 182.65% return on investment over 90 days.

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

Lemonade  vs.  The Allstate

Lemonade

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lemonade are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lemonade exhibited solid returns over the last few months and may actually be approaching a breakup point.

Allstate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady essential indicators, Allstate is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Lemonade and Allstate

The main advantage of trading using opposite Lemonade and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lemonade 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 Lemonade 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.