Correlation Between Allstate and Old Republic
Can any of the company-specific risk be diversified away by investing in both Allstate and Old Republic 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 Old Republic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and Old Republic International, you can compare the effects of market volatilities on Allstate and Old Republic 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 Old Republic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Old Republic.
Diversification Opportunities for Allstate and Old Republic
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Allstate and Old is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Old Republic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Republic Interna 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 Old Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Republic Interna has no effect on the direction of Allstate i.e., Allstate and Old Republic go up and down completely randomly.
Pair Corralation between Allstate and Old Republic
Considering the 90-day investment horizon The Allstate is expected to generate 1.12 times more return on investment than Old Republic. However, Allstate is 1.12 times more volatile than Old Republic International. It trades about 0.12 of its potential returns per unit of risk. Old Republic International is currently generating about 0.11 per unit of risk. If you would invest 14,014 in The Allstate on September 4, 2024 and sell it today you would earn a total of 6,326 from holding The Allstate or generate 45.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Allstate vs. Old Republic International
Performance |
| Timeline |
| Allstate |
| Old Republic Interna |
Allstate and Old Republic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and Old Republic
The main advantage of trading using opposite Allstate and Old Republic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, Old Republic 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 Old Republic will offset losses from the drop in Old Republic's long position.The idea behind The Allstate and Old Republic International 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.| Old Republic vs. Progressive Corp | Old Republic vs. Cincinnati Financial | Old Republic vs. W R Berkley | Old Republic vs. The Allstate |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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