Correlation Between Allianz SE and Baldwin Insurance

Can any of the company-specific risk be diversified away by investing in both Allianz SE and Baldwin Insurance 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 Allianz SE and Baldwin Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allianz SE ADR and The Baldwin Insurance, you can compare the effects of market volatilities on Allianz SE and Baldwin Insurance 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 Allianz SE with a short position of Baldwin Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allianz SE and Baldwin Insurance.

Diversification Opportunities for Allianz SE and Baldwin Insurance

-0.4

Correlation Coefficient

Allianz SE  Baldwin Insurance

Very good diversification

The 3 months correlation between Allianz and Baldwin is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Allianz SE ADR and The Baldwin Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baldwin Insurance and Allianz SE 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 Allianz SE ADR are associated (or correlated) with Baldwin Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baldwin Insurance has no effect on the direction of Allianz SE i.e., Allianz SE and Baldwin Insurance go up and down completely randomly.

Pair Corralation between Allianz SE and Baldwin Insurance

If you would invest  4,629  in The Baldwin Insurance on September 3, 2024 and sell it today you would earn a total of  267.00  from holding The Baldwin Insurance or generate 5.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Allianz SE ADR  vs.  The Baldwin Insurance

Allianz SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allianz SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Allianz SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baldwin Insurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Baldwin Insurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Baldwin Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Allianz SE and Baldwin Insurance

The main advantage of trading using opposite Allianz SE and Baldwin Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allianz SE position performs unexpectedly, Baldwin Insurance 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 Baldwin Insurance will offset losses from the drop in Baldwin Insurance's long position.

The idea behind Allianz SE ADR and The Baldwin Insurance 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.