Correlation Between ALLSTATE and Academy Sports

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

By analyzing existing cross correlation between ALLSTATE P 328 and Academy Sports Outdoors, you can compare the effects of market volatilities on ALLSTATE and Academy Sports 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 Academy Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALLSTATE and Academy Sports.

Diversification Opportunities for ALLSTATE and Academy Sports

-0.3

Correlation Coefficient

ALLSTATE  Academy Sports

Very good diversification

The 3 months correlation between ALLSTATE and Academy is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding ALLSTATE P 328 and Academy Sports Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Academy Sports Outdoors 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 328 are associated (or correlated) with Academy Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Academy Sports Outdoors has no effect on the direction of ALLSTATE i.e., ALLSTATE and Academy Sports go up and down completely randomly.

Pair Corralation between ALLSTATE and Academy Sports

Assuming the 90 days trading horizon ALLSTATE P 328 is expected to generate 20.78 times more return on investment than Academy Sports. However, ALLSTATE is 20.78 times more volatile than Academy Sports Outdoors. It trades about 0.04 of its potential returns per unit of risk. Academy Sports Outdoors is currently generating about 0.01 per unit of risk. If you would invest  9,763  in ALLSTATE P 328 on October 5, 2024 and sell it today you would lose (195.00) from holding ALLSTATE P 328 or give up 2.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.84%
Values	Daily Returns

ALLSTATE P 328  vs.  Academy Sports Outdoors

ALLSTATE P 328

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALLSTATE P 328 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Academy Sports Outdoors

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Academy Sports Outdoors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Academy Sports is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ALLSTATE and Academy Sports

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

The idea behind ALLSTATE P 328 and Academy Sports Outdoors 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.