Correlation Between Microsoft and Allstate
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Allstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and The Allstate, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Allstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Allstate.
Diversification Opportunities for Microsoft and Allstate
Modest diversification
The 3 months correlation between Microsoft and Allstate is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Microsoft 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 Microsoft 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 has no effect on the direction of Microsoft i.e., Microsoft and Allstate go up and down completely randomly.
Pair Corralation between Microsoft and Allstate
Given the investment horizon of 90 days Microsoft is expected to generate 5.01 times more return on investment than Allstate. However, Microsoft is 5.01 times more volatile than The Allstate. It trades about 0.02 of its potential returns per unit of risk. The Allstate is currently generating about 0.05 per unit of risk. If you would invest 42,574 in Microsoft on August 28, 2024 and sell it today you would earn a total of 225.00 from holding Microsoft or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. The Allstate
Performance |
| Timeline |
| Microsoft |
| Allstate |
Microsoft and Allstate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Allstate
The main advantage of trading using opposite Microsoft and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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Check out your portfolio center.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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