Correlation Between Allstate and HCI

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

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

Diversification Opportunities for Allstate and HCI

0.84

Correlation Coefficient

Allstate  HCI

Very poor diversification

The 3 months correlation between Allstate and HCI is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group and Allstate 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 The Allstate are associated (or correlated) with HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of Allstate i.e., Allstate and HCI go up and down completely randomly.

Pair Corralation between Allstate and HCI

Considering the 90-day investment horizon The Allstate is expected to generate 0.83 times more return on investment than HCI. However, The Allstate is 1.21 times less risky than HCI. It trades about 0.01 of its potential returns per unit of risk. HCI Group is currently generating about -0.05 per unit of risk. If you would invest  19,929  in The Allstate on May 5, 2025 and sell it today you would earn a total of  48.00  from holding The Allstate or generate 0.24% return on investment over 90 days.

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

The Allstate  vs.  HCI Group

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 quite persistent essential indicators, Allstate is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

HCI Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCI Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, HCI is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Allstate and HCI

The main advantage of trading using opposite Allstate and HCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, HCI 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 HCI will offset losses from the drop in HCI's long position.

The idea behind The Allstate and HCI Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.