Correlation Between Verizon Communications and ALLSTATE

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

By analyzing existing cross correlation between Verizon Communications and ALLSTATE P 328, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and ALLSTATE.

Diversification Opportunities for Verizon Communications and ALLSTATE

-0.52

Correlation Coefficient

Verizon Communications  ALLSTATE

Excellent diversification

The 3 months correlation between Verizon and ALLSTATE is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and ALLSTATE P 328 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE P 328 and Verizon Communications 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 Verizon Communications 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 328 has no effect on the direction of Verizon Communications i.e., Verizon Communications and ALLSTATE go up and down completely randomly.

Pair Corralation between Verizon Communications and ALLSTATE

Allowing for the 90-day total investment horizon Verizon Communications is expected to under-perform the ALLSTATE. In addition to that, Verizon Communications is 1.74 times more volatile than ALLSTATE P 328. It trades about -0.31 of its total potential returns per unit of risk. ALLSTATE P 328 is currently generating about -0.22 per unit of volatility. If you would invest  9,769  in ALLSTATE P 328 on October 5, 2024 and sell it today you would lose (201.00) from holding ALLSTATE P 328 or give up 2.06% of portfolio value over 90 days.

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

Verizon Communications  vs.  ALLSTATE P 328

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Verizon Communications and ALLSTATE

The main advantage of trading using opposite Verizon Communications and ALLSTATE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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 Verizon Communications and ALLSTATE P 328 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.