Correlation Between Bowhead Specialty and Allstate

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

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

Diversification Opportunities for Bowhead Specialty and Allstate

0.35

Correlation Coefficient

Bowhead Specialty  Allstate

Weak diversification

The 3 months correlation between Bowhead and Allstate is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bowhead Specialty Holdings and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Bowhead Specialty 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 Bowhead Specialty Holdings 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 Bowhead Specialty i.e., Bowhead Specialty and Allstate go up and down completely randomly.

Pair Corralation between Bowhead Specialty and Allstate

Considering the 90-day investment horizon Bowhead Specialty Holdings is expected to generate 4.21 times more return on investment than Allstate. However, Bowhead Specialty is 4.21 times more volatile than The Allstate. It trades about 0.16 of its potential returns per unit of risk. The Allstate is currently generating about 0.01 per unit of risk. If you would invest  3,455  in Bowhead Specialty Holdings on December 30, 2024 and sell it today you would earn a total of  760.00  from holding Bowhead Specialty Holdings or generate 22.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bowhead Specialty Holdings  vs.  The Allstate

Bowhead Specialty

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bowhead Specialty showed solid returns over the last few months and may actually be approaching a breakup point.

Allstate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady essential indicators, Allstate is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Bowhead Specialty and Allstate

The main advantage of trading using opposite Bowhead Specialty and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bowhead Specialty 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.

The idea behind Bowhead Specialty Holdings and The Allstate 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.