Correlation Between ALLSTATE and Sphere Entertainment

Can any of the company-specific risk be diversified away by investing in both ALLSTATE and Sphere Entertainment 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 Sphere Entertainment 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 Sphere Entertainment Co, you can compare the effects of market volatilities on ALLSTATE and Sphere Entertainment 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 Sphere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALLSTATE and Sphere Entertainment.

Diversification Opportunities for ALLSTATE and Sphere Entertainment

0.36

Correlation Coefficient

ALLSTATE  Sphere Entertainment

Weak diversification

The 3 months correlation between ALLSTATE and Sphere is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding ALLSTATE P 328 and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of ALLSTATE i.e., ALLSTATE and Sphere Entertainment go up and down completely randomly.

Pair Corralation between ALLSTATE and Sphere Entertainment

Assuming the 90 days trading horizon ALLSTATE P 328 is expected to under-perform the Sphere Entertainment. But the bond apears to be less risky and, when comparing its historical volatility, ALLSTATE P 328 is 5.3 times less risky than Sphere Entertainment. The bond trades about -0.22 of its potential returns per unit of risk. The Sphere Entertainment Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,958  in Sphere Entertainment Co on October 5, 2024 and sell it today you would earn a total of  193.00  from holding Sphere Entertainment Co or generate 4.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

ALLSTATE P 328  vs.  Sphere Entertainment Co

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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with ALLSTATE and Sphere Entertainment

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

The idea behind ALLSTATE P 328 and Sphere Entertainment Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.