Correlation Between Microsoft and ALLSTATE

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

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

Diversification Opportunities for Microsoft and ALLSTATE

-0.02

Correlation Coefficient

Microsoft  ALLSTATE

Good diversification

The 3 months correlation between Microsoft and ALLSTATE is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and ALLSTATE go up and down completely randomly.

Pair Corralation between Microsoft and ALLSTATE

Given the investment horizon of 90 days Microsoft is expected to generate 0.98 times more return on investment than ALLSTATE. However, Microsoft is 1.02 times less risky than ALLSTATE. It trades about 0.01 of its potential returns per unit of risk. ALLSTATE P 555 is currently generating about 0.0 per unit of risk. If you would invest  42,666  in Microsoft on October 22, 2024 and sell it today you would earn a total of  237.00  from holding Microsoft or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

Microsoft  vs.  ALLSTATE P 555

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ALLSTATE P 555

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALLSTATE P 555 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and ALLSTATE

The main advantage of trading using opposite Microsoft and ALLSTATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.