Correlation Between Allstate and Travelers Companies
Can any of the company-specific risk be diversified away by investing in both Allstate and Travelers Companies 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 Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and The Travelers Companies, you can compare the effects of market volatilities on Allstate and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Travelers Companies.
Diversification Opportunities for Allstate and Travelers Companies
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Allstate and Travelers is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Allstate i.e., Allstate and Travelers Companies go up and down completely randomly.
Pair Corralation between Allstate and Travelers Companies
Assuming the 90 days trading horizon Allstate is expected to generate 3.97 times less return on investment than Travelers Companies. But when comparing it to its historical volatility, The Allstate is 1.13 times less risky than Travelers Companies. It trades about 0.01 of its potential returns per unit of risk. The Travelers Companies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 17,774 in The Travelers Companies on November 19, 2024 and sell it today you would earn a total of 6,056 from holding The Travelers Companies or generate 34.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
The Allstate vs. The Travelers Companies
Performance |
| Timeline |
| Allstate |
| The Travelers Companies |
Allstate and Travelers Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and Travelers Companies
The main advantage of trading using opposite Allstate and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.| Allstate vs. The Allstate | Allstate vs. MetLife Preferred Stock | Allstate vs. Bank of America | Allstate vs. Capital One Financial |
| Travelers Companies vs. Progressive Corp | Travelers Companies vs. Chubb | Travelers Companies vs. Cincinnati Financial | Travelers Companies vs. W R Berkley |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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