Correlation Between Safety Insurance and Allstate

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

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

Diversification Opportunities for Safety Insurance and Allstate

-0.53

Correlation Coefficient

Safety Insurance  Allstate

Excellent diversification

The 3 months correlation between Safety and Allstate is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Safety Insurance 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 Safety Insurance Group 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 Safety Insurance i.e., Safety Insurance and Allstate go up and down completely randomly.

Pair Corralation between Safety Insurance and Allstate

Given the investment horizon of 90 days Safety Insurance is expected to generate 3.18 times less return on investment than Allstate. In addition to that, Safety Insurance is 3.62 times more volatile than The Allstate. It trades about 0.01 of its total potential returns per unit of risk. The Allstate is currently generating about 0.06 per unit of volatility. If you would invest  2,659  in The Allstate on September 4, 2024 and sell it today you would earn a total of  52.00  from holding The Allstate or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Safety Insurance Group  vs.  The Allstate

Safety Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safety Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Safety Insurance is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Allstate

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 4 (%) 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 Safety Insurance and Allstate

The main advantage of trading using opposite Safety Insurance and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance 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 Safety Insurance Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.