Correlation Between Allstate and Fednat Holding

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

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

Diversification Opportunities for Allstate and Fednat Holding

-0.45

Correlation Coefficient

Allstate  Fednat Holding

Very good diversification

The 3 months correlation between Allstate and Fednat is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and Fednat Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fednat Holding 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 Fednat Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fednat Holding has no effect on the direction of Allstate i.e., Allstate and Fednat Holding go up and down completely randomly.

Pair Corralation between Allstate and Fednat Holding

If you would invest  11,015  in The Allstate on January 24, 2024 and sell it today you would earn a total of  6,526  from holding The Allstate or generate 59.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.54%
Values	Daily Returns

The Allstate  vs.  Fednat Holding Co

Allstate

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent essential indicators, Allstate may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Fednat Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fednat Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Fednat Holding is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allstate and Fednat Holding

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

The idea behind The Allstate and Fednat Holding Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.