Correlation Between Allstate and Assurant
Can any of the company-specific risk be diversified away by investing in both Allstate and Assurant 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 Assurant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Allstate and Assurant, you can compare the effects of market volatilities on Allstate and Assurant 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 Assurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and Assurant.
Diversification Opportunities for Allstate and Assurant
Very poor diversification
The 3 months correlation between Allstate and Assurant is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Assurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assurant 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 Assurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assurant has no effect on the direction of Allstate i.e., Allstate and Assurant go up and down completely randomly.
Pair Corralation between Allstate and Assurant
Considering the 90-day investment horizon The Allstate is expected to generate 1.26 times more return on investment than Assurant. However, Allstate is 1.26 times more volatile than Assurant. It trades about -0.02 of its potential returns per unit of risk. Assurant is currently generating about -0.09 per unit of risk. If you would invest 20,439 in The Allstate on December 1, 2024 and sell it today you would lose (524.00) from holding The Allstate or give up 2.56% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
The Allstate vs. Assurant
Performance |
Timeline |
Allstate |
Assurant |
Allstate and Assurant Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Allstate and Assurant
The main advantage of trading using opposite Allstate and Assurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, Assurant 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 Assurant will offset losses from the drop in Assurant's long position.The idea behind The Allstate and Assurant 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.Assurant vs. Assured Guaranty | Assurant vs. Ambac Financial Group | Assurant vs. AMERISAFE | Assurant vs. Enact Holdings |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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