Correlation Between Selective Insurance and Allstate
Can any of the company-specific risk be diversified away by investing in both Selective Insurance 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 Selective Insurance and Allstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Selective Insurance Group and The Allstate, you can compare the effects of market volatilities on Selective Insurance 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 Selective Insurance with a short position of Allstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selective Insurance and Allstate.
Diversification Opportunities for Selective Insurance and Allstate
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Selective and Allstate is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Selective Insurance 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 Selective Insurance Group 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 Selective Insurance i.e., Selective Insurance and Allstate go up and down completely randomly.
Pair Corralation between Selective Insurance and Allstate
Assuming the 90 days horizon Selective Insurance is expected to generate 3.94 times less return on investment than Allstate. But when comparing it to its historical volatility, Selective Insurance Group is 1.73 times less risky than Allstate. It trades about 0.06 of its potential returns per unit of risk. The Allstate is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 16,332 in The Allstate on September 1, 2024 and sell it today you would earn a total of 4,407 from holding The Allstate or generate 26.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Selective Insurance Group vs. The Allstate
Performance |
| Timeline |
| Selective Insurance |
| Allstate |
Selective Insurance and Allstate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Selective Insurance and Allstate
The main advantage of trading using opposite Selective Insurance and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selective Insurance 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.| Selective Insurance vs. Brighthouse Financial | Selective Insurance vs. First Citizens BancShares | Selective Insurance vs. Northern Trust | Selective Insurance vs. Dime Community Bancshares |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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