Correlation Between Alleghany and Chubb
Can any of the company-specific risk be diversified away by investing in both Alleghany and Chubb 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 Alleghany and Chubb into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alleghany and Chubb, you can compare the effects of market volatilities on Alleghany and Chubb 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 Alleghany with a short position of Chubb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alleghany and Chubb.
Diversification Opportunities for Alleghany and Chubb
Very weak diversification
The 3 months correlation between Alleghany and Chubb is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alleghany and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and Alleghany 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 Alleghany are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of Alleghany i.e., Alleghany and Chubb go up and down completely randomly.
Pair Corralation between Alleghany and Chubb
Taking into account the 90-day investment horizon Alleghany is expected to generate 2.6 times less return on investment than Chubb. But when comparing it to its historical volatility, Alleghany is 7.49 times less risky than Chubb. It trades about 0.1 of its potential returns per unit of risk. Chubb is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 20,246 in Chubb on January 26, 2024 and sell it today you would earn a total of 4,055 from holding Chubb or generate 20.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 23.23% |
| Values | Daily Returns |
Alleghany vs. Chubb
Performance |
| Timeline |
| Alleghany |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chubb |
Alleghany and Chubb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alleghany and Chubb
The main advantage of trading using opposite Alleghany and Chubb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alleghany position performs unexpectedly, Chubb 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 Chubb will offset losses from the drop in Chubb's long position.| Alleghany vs. Visionary Education Technology | Alleghany vs. Taiwan Semiconductor Manufacturing | Alleghany vs. 51Talk Online Education | Alleghany vs. Cirrus Logic |
| Chubb vs. Cincinnati Financial | Chubb vs. Aflac Incorporated | Chubb vs. Dover | Chubb vs. Franklin Resources |
Check out your portfolio center.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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