Correlation Between Allstate and RLI Corp
Can any of the company-specific risk be diversified away by investing in both Allstate and RLI Corp 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 RLI Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and RLI Corp, you can compare the effects of market volatilities on Allstate and RLI Corp 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 RLI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and RLI Corp.
Diversification Opportunities for Allstate and RLI Corp
Excellent diversification
The 3 months correlation between Allstate and RLI is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and RLI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLI Corp 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 RLI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLI Corp has no effect on the direction of Allstate i.e., Allstate and RLI Corp go up and down completely randomly.
Pair Corralation between Allstate and RLI Corp
Assuming the 90 days trading horizon The Allstate is expected to under-perform the RLI Corp. But the preferred stock apears to be less risky and, when comparing its historical volatility, The Allstate is 1.28 times less risky than RLI Corp. The preferred stock trades about -0.23 of its potential returns per unit of risk. The RLI Corp is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest 15,650 in RLI Corp on August 27, 2024 and sell it today you would earn a total of 2,326 from holding RLI Corp or generate 14.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Allstate vs. RLI Corp
Performance |
| Timeline |
| Allstate |
| RLI Corp |
Allstate and RLI Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and RLI Corp
The main advantage of trading using opposite Allstate and RLI Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, RLI Corp 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 RLI Corp will offset losses from the drop in RLI Corp's long position.| Allstate vs. Aspen Insurance Holdings | Allstate vs. Aspen Insurance Holdings | Allstate vs. AmTrust Financial Services | Allstate vs. Argo Group International |
| RLI Corp vs. Horace Mann Educators | RLI Corp vs. Kemper | RLI Corp vs. Global Indemnity PLC | RLI Corp vs. Argo Group International |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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