Correlation Between Global Indemnity and Allstate
Can any of the company-specific risk be diversified away by investing in both Global Indemnity 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 Global Indemnity and Allstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Indemnity PLC and The Allstate, you can compare the effects of market volatilities on Global Indemnity 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 Global Indemnity with a short position of Allstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Indemnity and Allstate.
Diversification Opportunities for Global Indemnity and Allstate
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Global and Allstate is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Global Indemnity PLC and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Global Indemnity 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 Global Indemnity PLC 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 Global Indemnity i.e., Global Indemnity and Allstate go up and down completely randomly.
Pair Corralation between Global Indemnity and Allstate
Given the investment horizon of 90 days Global Indemnity is expected to generate 2.74 times less return on investment than Allstate. But when comparing it to its historical volatility, Global Indemnity PLC is 1.41 times less risky than Allstate. It trades about 0.14 of its potential returns per unit of risk. The Allstate is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 18,812 in The Allstate on August 26, 2024 and sell it today you would earn a total of 1,568 from holding The Allstate or generate 8.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Indemnity PLC vs. The Allstate
Performance |
| Timeline |
| Global Indemnity PLC |
| Allstate |
Global Indemnity and Allstate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Indemnity and Allstate
The main advantage of trading using opposite Global Indemnity and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Indemnity 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.| Global Indemnity vs. Selective Insurance Group | Global Indemnity vs. Kemper | Global Indemnity vs. Donegal Group B | Global Indemnity vs. Argo Group International |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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