Correlation Between Allstate and FirstCash
Can any of the company-specific risk be diversified away by investing in both Allstate and FirstCash 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 FirstCash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and FirstCash, you can compare the effects of market volatilities on Allstate and FirstCash 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 FirstCash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and FirstCash.
Diversification Opportunities for Allstate and FirstCash
Very poor diversification
The 3 months correlation between Allstate and FirstCash is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and FirstCash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstCash 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 The Allstate are associated (or correlated) with FirstCash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstCash has no effect on the direction of Allstate i.e., Allstate and FirstCash go up and down completely randomly.
Pair Corralation between Allstate and FirstCash
Considering the 90-day investment horizon Allstate is expected to generate 1.48 times less return on investment than FirstCash. In addition to that, Allstate is 1.14 times more volatile than FirstCash. It trades about 0.16 of its total potential returns per unit of risk. FirstCash is currently generating about 0.27 per unit of volatility. If you would invest 12,011 in FirstCash on January 20, 2024 and sell it today you would earn a total of 861.00 from holding FirstCash or generate 7.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
The Allstate vs. FirstCash
Performance |
| Timeline |
| Allstate |
| FirstCash |
Allstate and FirstCash Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and FirstCash
The main advantage of trading using opposite Allstate and FirstCash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, FirstCash 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 FirstCash will offset losses from the drop in FirstCash's long position.The idea behind The Allstate and FirstCash 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.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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