Correlation Between PPL and Allstate
Can any of the company-specific risk be diversified away by investing in both PPL 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 PPL and Allstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PPL Corporation and The Allstate, you can compare the effects of market volatilities on PPL 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 PPL with a short position of Allstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPL and Allstate.
Diversification Opportunities for PPL and Allstate
Poor diversification
The 3 months correlation between PPL and Allstate is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PPL Corp. and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and PPL 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 PPL Corporation 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 PPL i.e., PPL and Allstate go up and down completely randomly.
Pair Corralation between PPL and Allstate
Considering the 90-day investment horizon PPL is expected to generate 12.59 times less return on investment than Allstate. But when comparing it to its historical volatility, PPL Corporation is 1.21 times less risky than Allstate. It trades about 0.02 of its potential returns per unit of risk. The Allstate is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 11,015 in The Allstate on January 24, 2024 and sell it today you would earn a total of 6,526 from holding The Allstate or generate 59.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PPL Corp. vs. The Allstate
Performance |
| Timeline |
| PPL Corporation |
| Allstate |
PPL and Allstate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PPL and Allstate
The main advantage of trading using opposite PPL and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPL 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.| PPL vs. Centrais Eltricas Brasileiras | PPL vs. Central Puerto SA | PPL vs. CMS Energy | PPL vs. Centrais Electricas Brasileiras |
| Allstate vs. Aquagold International | Allstate vs. Thrivent High Yield | Allstate vs. Morningstar Unconstrained Allocation | Allstate vs. Via Renewables |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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