Correlation Between ALLSTATE and Weibo Corp

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

Diversification Opportunities for ALLSTATE and Weibo Corp

0.2

Correlation Coefficient

ALLSTATE  Weibo Corp

Modest diversification

The 3 months correlation between ALLSTATE and Weibo is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding ALLSTATE P 328 and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of ALLSTATE i.e., ALLSTATE and Weibo Corp go up and down completely randomly.

Pair Corralation between ALLSTATE and Weibo Corp

Assuming the 90 days trading horizon ALLSTATE P 328 is expected to generate 15.62 times more return on investment than Weibo Corp. However, ALLSTATE is 15.62 times more volatile than Weibo Corp. It trades about 0.04 of its potential returns per unit of risk. Weibo Corp is currently generating about -0.03 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 Together
Strength	Very Weak
Accuracy	84.01%
Values	Daily Returns

ALLSTATE P 328  vs.  Weibo Corp

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.

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ALLSTATE and Weibo Corp

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

The idea behind ALLSTATE P 328 and Weibo Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.