Correlation Between Cincinnati Financial and Allstate
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Allstate 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 Cincinnati Financial and Allstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and The Allstate, you can compare the effects of market volatilities on Cincinnati Financial and Allstate 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 Cincinnati Financial with a short position of Allstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Allstate.
Diversification Opportunities for Cincinnati Financial and Allstate
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cincinnati and Allstate is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Cincinnati Financial 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 Cincinnati Financial are associated (or correlated) with Allstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allstate has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Allstate go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Allstate
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 1.14 times less return on investment than Allstate. In addition to that, Cincinnati Financial is 1.01 times more volatile than The Allstate. It trades about 0.07 of its total potential returns per unit of risk. The Allstate is currently generating about 0.08 per unit of volatility. If you would invest 12,301 in The Allstate on August 31, 2024 and sell it today you would earn a total of 8,519 from holding The Allstate or generate 69.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. The Allstate
Performance |
| Timeline |
| Cincinnati Financial |
| Allstate |
Cincinnati Financial and Allstate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Allstate
The main advantage of trading using opposite Cincinnati Financial and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Allstate 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 Allstate will offset losses from the drop in Allstate's long position.| Cincinnati Financial vs. Progressive Corp | Cincinnati Financial vs. Chubb | Cincinnati Financial vs. The Allstate | Cincinnati Financial vs. Selective Insurance Group |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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