Correlation Between ATT and ALLSTATE

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

By analyzing existing cross correlation between ATT Inc and ALLSTATE P 42, you can compare the effects of market volatilities on ATT 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 ATT with a short position of ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and ALLSTATE.

Diversification Opportunities for ATT and ALLSTATE

-0.56

Correlation Coefficient

ATT  ALLSTATE

Excellent diversification

The 3 months correlation between ATT and ALLSTATE is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and ALLSTATE P 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE P 42 and ATT 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 ATT Inc 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 42 has no effect on the direction of ATT i.e., ATT and ALLSTATE go up and down completely randomly.

Pair Corralation between ATT and ALLSTATE

Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.64 times more return on investment than ALLSTATE. However, ATT Inc is 1.56 times less risky than ALLSTATE. It trades about 0.13 of its potential returns per unit of risk. ALLSTATE P 42 is currently generating about 0.04 per unit of risk. If you would invest  1,342  in ATT Inc on October 4, 2024 and sell it today you would earn a total of  941.00  from holding ATT Inc or generate 70.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	71.3%
Values	Daily Returns

ATT Inc  vs.  ALLSTATE P 42

ATT Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ATT is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ALLSTATE P 42

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALLSTATE P 42 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, ALLSTATE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ATT and ALLSTATE

The main advantage of trading using opposite ATT and ALLSTATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc and ALLSTATE P 42 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.