Correlation Between ProAssurance and Allstate

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

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

Diversification Opportunities for ProAssurance and Allstate

0.5

Correlation Coefficient

ProAssurance  Allstate

Very weak diversification

The 3 months correlation between ProAssurance and Allstate is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ProAssurance and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and ProAssurance 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 ProAssurance 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 ProAssurance i.e., ProAssurance and Allstate go up and down completely randomly.

Pair Corralation between ProAssurance and Allstate

Considering the 90-day investment horizon ProAssurance is expected to generate 3.2 times more return on investment than Allstate. However, ProAssurance is 3.2 times more volatile than The Allstate. It trades about 0.14 of its potential returns per unit of risk. The Allstate is currently generating about 0.05 per unit of risk. If you would invest  1,453  in ProAssurance on January 11, 2025 and sell it today you would earn a total of  861.00  from holding ProAssurance or generate 59.26% return on investment over 90 days.

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

ProAssurance  vs.  The Allstate

ProAssurance

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProAssurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ProAssurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Allstate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Allstate may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with ProAssurance and Allstate

The main advantage of trading using opposite ProAssurance and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProAssurance 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 ProAssurance 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.