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
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Safety and Allstate is 0.85. 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
Assuming the 90 days horizon Safety Insurance is expected to generate 1.78 times less return on investment than Allstate. But when comparing it to its historical volatility, Safety Insurance Group is 1.13 times less risky than Allstate. It trades about 0.1 of its potential returns per unit of risk. The Allstate is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 16,637 in The Allstate on September 7, 2024 and sell it today you would earn a total of 2,703 from holding The Allstate or generate 16.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Safety Insurance Group vs. The Allstate
Performance |
Timeline |
Safety Insurance |
Allstate |
Safety Insurance and Allstate Volatility Contrast
Predicted Return Density |
Returns |
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.Safety Insurance vs. ABC MUNICATIONS | Safety Insurance vs. TROPHY GAMES DEV | Safety Insurance vs. GAMESTOP | Safety Insurance vs. Cogent Communications Holdings |
Allstate vs. CITY OFFICE REIT | Allstate vs. Jacquet Metal Service | Allstate vs. CEOTRONICS | Allstate vs. Ares Management Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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