Correlation Between Allstate and NI Holdings

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

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

Diversification Opportunities for Allstate and NI Holdings

0.59

Correlation Coefficient

Allstate  NI Holdings

Very weak diversification

The 3 months correlation between Allstate and NODK is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings 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 NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of Allstate i.e., Allstate and NI Holdings go up and down completely randomly.

Pair Corralation between Allstate and NI Holdings

Considering the 90-day investment horizon The Allstate is expected to generate 1.03 times more return on investment than NI Holdings. However, Allstate is 1.03 times more volatile than NI Holdings. It trades about 0.39 of its potential returns per unit of risk. NI Holdings is currently generating about 0.08 per unit of risk. If you would invest  18,156  in The Allstate on September 4, 2024 and sell it today you would earn a total of  2,184  from holding The Allstate or generate 12.03% return on investment over 90 days.

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

The Allstate  vs.  NI Holdings

Allstate

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 7 (%) 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 January 2025.

NI Holdings

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, NI Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Allstate and NI Holdings

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

The idea behind The Allstate and NI Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.