Correlation Between RLI Corp and Allstate

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

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

Diversification Opportunities for RLI Corp and Allstate

0.4

Correlation Coefficient

RLI Corp  Allstate

Very weak diversification

The 3 months correlation between RLI and Allstate is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and RLI Corp 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 RLI Corp 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 RLI Corp i.e., RLI Corp and Allstate go up and down completely randomly.

Pair Corralation between RLI Corp and Allstate

Considering the 90-day investment horizon RLI Corp is expected to under-perform the Allstate. In addition to that, RLI Corp is 1.28 times more volatile than The Allstate. It trades about -0.17 of its total potential returns per unit of risk. The Allstate is currently generating about 0.19 per unit of volatility. If you would invest  19,390  in The Allstate on February 21, 2025 and sell it today you would earn a total of  862.00  from holding The Allstate or generate 4.45% return on investment over 90 days.

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

RLI Corp  vs.  The Allstate

RLI Corp

Risk-Adjusted Performance

Very Weak

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

Allstate

Risk-Adjusted Performance

OK

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. Despite quite weak essential indicators, Allstate may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with RLI Corp and Allstate

The main advantage of trading using opposite RLI Corp and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLI Corp 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 RLI Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.