Correlation Between Assurant and Allstate

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

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

Diversification Opportunities for Assurant and Allstate

0.62

Correlation Coefficient

Assurant  Allstate

Poor diversification

The 3 months correlation between Assurant and Allstate is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Assurant and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Assurant 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 Assurant 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 Assurant i.e., Assurant and Allstate go up and down completely randomly.

Pair Corralation between Assurant and Allstate

Considering the 90-day investment horizon Assurant is expected to generate 3.11 times more return on investment than Allstate. However, Assurant is 3.11 times more volatile than The Allstate. It trades about 0.24 of its potential returns per unit of risk. The Allstate is currently generating about -0.08 per unit of risk. If you would invest  18,958  in Assurant on August 9, 2024 and sell it today you would earn a total of  1,679  from holding Assurant or generate 8.86% return on investment over 90 days.

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

Assurant  vs.  The Allstate

Assurant

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Assurant are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Assurant showed solid returns over the last few months and may actually be approaching a breakup point.

Allstate

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 14 (%) 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 Assurant and Allstate

The main advantage of trading using opposite Assurant and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Assurant 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 Assurant 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.