Correlation Between Allstate and HCI
Can any of the company-specific risk be diversified away by investing in both Allstate and HCI 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 HCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and HCI Group, you can compare the effects of market volatilities on Allstate and HCI 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 HCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and HCI.
Diversification Opportunities for Allstate and HCI
Very weak diversification
The 3 months correlation between Allstate and HCI is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group 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 HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of Allstate i.e., Allstate and HCI go up and down completely randomly.
Pair Corralation between Allstate and HCI
Assuming the 90 days trading horizon The Allstate is expected to under-perform the HCI. But the preferred stock apears to be less risky and, when comparing its historical volatility, The Allstate is 3.32 times less risky than HCI. The preferred stock trades about -0.12 of its potential returns per unit of risk. The HCI Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 11,479 in HCI Group on August 31, 2024 and sell it today you would earn a total of 192.00 from holding HCI Group or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Allstate vs. HCI Group
Performance |
| Timeline |
| Allstate |
| HCI Group |
Allstate and HCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and HCI
The main advantage of trading using opposite Allstate and HCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, HCI 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 HCI will offset losses from the drop in HCI's long position.The idea behind The Allstate and HCI Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| HCI vs. Universal Insurance Holdings | HCI vs. Kingstone Companies | HCI vs. Horace Mann Educators | HCI vs. Heritage Insurance Hldgs |
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.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |