Correlation Between Chubb and Allstate

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

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

Diversification Opportunities for Chubb and Allstate

0.92

Correlation Coefficient

Chubb  Allstate

Almost no diversification

The 3 months correlation between Chubb and Allstate is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Chubb 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 Chubb 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 Chubb i.e., Chubb and Allstate go up and down completely randomly.

Pair Corralation between Chubb and Allstate

Allowing for the 90-day total investment horizon Chubb is expected to generate 0.74 times more return on investment than Allstate. However, Chubb is 1.35 times less risky than Allstate. It trades about -0.05 of its potential returns per unit of risk. The Allstate is currently generating about -0.08 per unit of risk. If you would invest  28,778  in Chubb on November 28, 2024 and sell it today you would lose (1,033) from holding Chubb or give up 3.59% of portfolio value over 90 days.

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

Chubb  vs.  The Allstate

Chubb

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chubb has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Allstate

Risk-Adjusted Performance

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 Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Chubb and Allstate

The main advantage of trading using opposite Chubb and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chubb 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 Chubb 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.