Correlation Between Allstate and Heritage Insurance
Can any of the company-specific risk be diversified away by investing in both Allstate and Heritage Insurance 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 Heritage Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and Heritage Insurance Hldgs, you can compare the effects of market volatilities on Allstate and Heritage Insurance 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 Heritage Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Heritage Insurance.
Diversification Opportunities for Allstate and Heritage Insurance
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allstate and Heritage is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Heritage Insurance Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Insurance Hldgs 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 Heritage Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Insurance Hldgs has no effect on the direction of Allstate i.e., Allstate and Heritage Insurance go up and down completely randomly.
Pair Corralation between Allstate and Heritage Insurance
Considering the 90-day investment horizon The Allstate is expected to generate 0.35 times more return on investment than Heritage Insurance. However, The Allstate is 2.85 times less risky than Heritage Insurance. It trades about 0.06 of its potential returns per unit of risk. Heritage Insurance Hldgs is currently generating about -0.01 per unit of risk. If you would invest 18,692 in The Allstate on December 25, 2024 and sell it today you would earn a total of 1,955 from holding The Allstate or generate 10.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Allstate vs. Heritage Insurance Hldgs
Performance |
| Timeline |
| Allstate |
| Heritage Insurance Hldgs |
Allstate and Heritage Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and Heritage Insurance
The main advantage of trading using opposite Allstate and Heritage Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, Heritage Insurance 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 Heritage Insurance will offset losses from the drop in Heritage Insurance's long position.The idea behind The Allstate and Heritage Insurance Hldgs 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.| Heritage Insurance vs. Universal Insurance Holdings | Heritage Insurance vs. Donegal Group B | Heritage Insurance vs. Horace Mann Educators | Heritage Insurance vs. NI Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Fundamental Analysis View fundamental data based on most recent published financial statements |