Correlation Between ALLSTATE and Western Copper

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

By analyzing existing cross correlation between ALLSTATE P 535 and Western Copper and, you can compare the effects of market volatilities on ALLSTATE and Western Copper 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 ALLSTATE with a short position of Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALLSTATE and Western Copper.

Diversification Opportunities for ALLSTATE and Western Copper

0.43

Correlation Coefficient

ALLSTATE  Western Copper

Very weak diversification

The 3 months correlation between ALLSTATE and Western is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ALLSTATE P 535 and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper and ALLSTATE 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 ALLSTATE P 535 are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of ALLSTATE i.e., ALLSTATE and Western Copper go up and down completely randomly.

Pair Corralation between ALLSTATE and Western Copper

Assuming the 90 days trading horizon ALLSTATE P 535 is expected to generate 0.41 times more return on investment than Western Copper. However, ALLSTATE P 535 is 2.42 times less risky than Western Copper. It trades about 0.05 of its potential returns per unit of risk. Western Copper and is currently generating about 0.01 per unit of risk. If you would invest  10,031  in ALLSTATE P 535 on October 22, 2024 and sell it today you would earn a total of  81.00  from holding ALLSTATE P 535 or generate 0.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	83.33%
Values	Daily Returns

ALLSTATE P 535  vs.  Western Copper and

ALLSTATE P 535

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALLSTATE P 535 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.

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with ALLSTATE and Western Copper

The main advantage of trading using opposite ALLSTATE and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALLSTATE position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.

The idea behind ALLSTATE P 535 and Western Copper and 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.