Correlation Between Allstate and Stericycle
Can any of the company-specific risk be diversified away by investing in both Allstate and Stericycle 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 Stericycle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and Stericycle, you can compare the effects of market volatilities on Allstate and Stericycle 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 Stericycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Stericycle.
Diversification Opportunities for Allstate and Stericycle
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Allstate and Stericycle is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Stericycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stericycle 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 Stericycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stericycle has no effect on the direction of Allstate i.e., Allstate and Stericycle go up and down completely randomly.
Pair Corralation between Allstate and Stericycle
Considering the 90-day investment horizon The Allstate is expected to generate 1.64 times more return on investment than Stericycle. However, Allstate is 1.64 times more volatile than Stericycle. It trades about 0.16 of its potential returns per unit of risk. Stericycle is currently generating about -0.38 per unit of risk. If you would invest 16,117 in The Allstate on January 20, 2024 and sell it today you would earn a total of 794.00 from holding The Allstate or generate 4.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Allstate vs. Stericycle
Performance |
| Timeline |
| Allstate |
| Stericycle |
Allstate and Stericycle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and Stericycle
The main advantage of trading using opposite Allstate and Stericycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, Stericycle 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 Stericycle will offset losses from the drop in Stericycle's long position.The idea behind The Allstate and Stericycle 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.| Stericycle vs. Clean Harbors | Stericycle vs. Waste Connections | Stericycle vs. Casella Waste Systems | Stericycle vs. Montrose Environmental Grp |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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