Correlation Between Allstate and Hiscox

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

By analyzing existing cross correlation between The Allstate and Hiscox, you can compare the effects of market volatilities on Allstate and Hiscox 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 Hiscox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Hiscox.

Diversification Opportunities for Allstate and Hiscox

0.63

Correlation Coefficient

Allstate  Hiscox

Poor diversification

The 3 months correlation between Allstate and Hiscox is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Hiscox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiscox 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 Hiscox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiscox has no effect on the direction of Allstate i.e., Allstate and Hiscox go up and down completely randomly.

Pair Corralation between Allstate and Hiscox

Assuming the 90 days trading horizon The Allstate is expected to under-perform the Hiscox. But the preferred stock apears to be less risky and, when comparing its historical volatility, The Allstate is 2.02 times less risky than Hiscox. The preferred stock trades about -0.11 of its potential returns per unit of risk. The Hiscox is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,893  in Hiscox on October 10, 2024 and sell it today you would lose (130.00) from holding Hiscox or give up 4.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

The Allstate  vs.  Hiscox

Allstate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Allstate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Hiscox

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Allstate and Hiscox

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

The idea behind The Allstate and Hiscox 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.