Correlation Between White Mountains and Allstate

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

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

Diversification Opportunities for White Mountains and Allstate

-0.32

Correlation Coefficient

White Mountains  Allstate

Very good diversification

The 3 months correlation between White and Allstate is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding White Mountains Insurance and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and White Mountains 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 White Mountains Insurance 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 White Mountains i.e., White Mountains and Allstate go up and down completely randomly.

Pair Corralation between White Mountains and Allstate

Considering the 90-day investment horizon White Mountains Insurance is expected to generate 2.93 times more return on investment than Allstate. However, White Mountains is 2.93 times more volatile than The Allstate. It trades about 0.11 of its potential returns per unit of risk. The Allstate is currently generating about 0.08 per unit of risk. If you would invest  182,343  in White Mountains Insurance on September 2, 2024 and sell it today you would earn a total of  18,656  from holding White Mountains Insurance or generate 10.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

White Mountains Insurance  vs.  The Allstate

White Mountains Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in White Mountains Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, White Mountains may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Allstate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 6 (%) 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 latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with White Mountains and Allstate

The main advantage of trading using opposite White Mountains and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if White Mountains 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 White Mountains Insurance 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.