Correlation Between Allstate and Insurance Australia
Can any of the company-specific risk be diversified away by investing in both Allstate and Insurance Australia 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 Insurance Australia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and Insurance Australia Group, you can compare the effects of market volatilities on Allstate and Insurance Australia 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 Insurance Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Insurance Australia.
Diversification Opportunities for Allstate and Insurance Australia
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Allstate and Insurance is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Insurance Australia Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insurance Australia 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 Insurance Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insurance Australia has no effect on the direction of Allstate i.e., Allstate and Insurance Australia go up and down completely randomly.
Pair Corralation between Allstate and Insurance Australia
Assuming the 90 days horizon The Allstate is expected to generate 0.74 times more return on investment than Insurance Australia. However, The Allstate is 1.34 times less risky than Insurance Australia. It trades about 0.33 of its potential returns per unit of risk. Insurance Australia Group is currently generating about 0.22 per unit of risk. If you would invest 17,370 in The Allstate on August 28, 2024 and sell it today you would earn a total of 2,245 from holding The Allstate or generate 12.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
The Allstate vs. Insurance Australia Group
Performance |
| Timeline |
| Allstate |
| Insurance Australia |
Allstate and Insurance Australia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allstate and Insurance Australia
The main advantage of trading using opposite Allstate and Insurance Australia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, Insurance Australia 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 Insurance Australia will offset losses from the drop in Insurance Australia's long position.| Allstate vs. Superior Plus Corp | Allstate vs. NMI Holdings | Allstate vs. Origin Agritech | Allstate vs. SIVERS SEMICONDUCTORS AB |
| Insurance Australia vs. Superior Plus Corp | Insurance Australia vs. NMI Holdings | Insurance Australia vs. Origin Agritech | Insurance Australia vs. SIVERS SEMICONDUCTORS AB |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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