Correlation Between Allstate and AXIS Capital

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

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

Diversification Opportunities for Allstate and AXIS Capital

0.69

Correlation Coefficient

Allstate  AXIS Capital

Poor diversification

The 3 months correlation between Allstate and AXIS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and AXIS Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXIS Capital 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 AXIS Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXIS Capital Holdings has no effect on the direction of Allstate i.e., Allstate and AXIS Capital go up and down completely randomly.

Pair Corralation between Allstate and AXIS Capital

Considering the 90-day investment horizon Allstate is expected to generate 1.55 times less return on investment than AXIS Capital. But when comparing it to its historical volatility, The Allstate is 1.1 times less risky than AXIS Capital. It trades about 0.11 of its potential returns per unit of risk. AXIS Capital Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,808  in AXIS Capital Holdings on February 4, 2024 and sell it today you would earn a total of  731.00  from holding AXIS Capital Holdings or generate 12.59% return on investment over 90 days.

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

The Allstate  vs.  AXIS Capital Holdings

Allstate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 8 (%) 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 2024.

AXIS Capital Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AXIS Capital Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AXIS Capital may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Allstate and AXIS Capital

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

The idea behind The Allstate and AXIS Capital 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.