Correlation Between Allstate and Federal Agricultural
Can any of the company-specific risk be diversified away by investing in both Allstate and Federal Agricultural 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 Federal Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and Federal Agricultural Mortgage, you can compare the effects of market volatilities on Allstate and Federal Agricultural 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 Federal Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Federal Agricultural.
Diversification Opportunities for Allstate and Federal Agricultural
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allstate and Federal is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Federal Agricultural Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Agricultural 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 Federal Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Agricultural has no effect on the direction of Allstate i.e., Allstate and Federal Agricultural go up and down completely randomly.
Pair Corralation between Allstate and Federal Agricultural
Assuming the 90 days trading horizon The Allstate is expected to under-perform the Federal Agricultural. But the preferred stock apears to be less risky and, when comparing its historical volatility, The Allstate is 1.19 times less risky than Federal Agricultural. The preferred stock trades about -0.26 of its potential returns per unit of risk. The Federal Agricultural Mortgage is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 2,078 in Federal Agricultural Mortgage on August 28, 2024 and sell it today you would lose (65.00) from holding Federal Agricultural Mortgage or give up 3.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Allstate vs. Federal Agricultural Mortgage
Performance |
| Timeline |
| Allstate |
| Federal Agricultural |
Allstate and Federal Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and Federal Agricultural
The main advantage of trading using opposite Allstate and Federal Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, Federal Agricultural 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 Federal Agricultural will offset losses from the drop in Federal Agricultural's long position.| Allstate vs. Aspen Insurance Holdings | Allstate vs. Aspen Insurance Holdings | Allstate vs. AmTrust Financial Services | Allstate vs. Argo Group International |
| Federal Agricultural vs. Capital One Financial | Federal Agricultural vs. Capital One Financial | Federal Agricultural vs. JPMorgan Chase Co |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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