Correlation Between Arch Capital and Allstate
Can any of the company-specific risk be diversified away by investing in both Arch Capital 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 Arch Capital and Allstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arch Capital Group and The Allstate, you can compare the effects of market volatilities on Arch Capital 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 Arch Capital with a short position of Allstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and Allstate.
Diversification Opportunities for Arch Capital and Allstate
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Arch and Allstate is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Arch Capital 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 Arch Capital Group 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 Arch Capital i.e., Arch Capital and Allstate go up and down completely randomly.
Pair Corralation between Arch Capital and Allstate
Assuming the 90 days horizon Arch Capital Group is expected to generate 0.72 times more return on investment than Allstate. However, Arch Capital Group is 1.39 times less risky than Allstate. It trades about -0.19 of its potential returns per unit of risk. The Allstate is currently generating about -0.26 per unit of risk. If you would invest 2,357 in Arch Capital Group on August 28, 2024 and sell it today you would lose (70.00) from holding Arch Capital Group or give up 2.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Arch Capital Group vs. The Allstate
Performance |
| Timeline |
| Arch Capital Group |
| Allstate |
Arch Capital and Allstate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arch Capital and Allstate
The main advantage of trading using opposite Arch Capital and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Capital 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.| Arch Capital vs. Athene Holding | Arch Capital vs. The Hartford Financial | Arch Capital vs. Arch Capital Group | Arch Capital vs. Athene Holding |
| Allstate vs. The Allstate | Allstate vs. MetLife Preferred Stock | Allstate vs. Bank of America | Allstate vs. Capital One Financial |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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