Correlation Between American Equity and National Western
Can any of the company-specific risk be diversified away by investing in both American Equity and National Western 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 American Equity and National Western into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Equity Investment and National Western Life, you can compare the effects of market volatilities on American Equity and National Western 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 American Equity with a short position of National Western. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Equity and National Western.
Diversification Opportunities for American Equity and National Western
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and National is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment and National Western Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Western Life and American Equity 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 American Equity Investment are associated (or correlated) with National Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Western Life has no effect on the direction of American Equity i.e., American Equity and National Western go up and down completely randomly.
Pair Corralation between American Equity and National Western
Considering the 90-day investment horizon American Equity Investment is expected to generate 0.87 times more return on investment than National Western. However, American Equity Investment is 1.15 times less risky than National Western. It trades about 0.21 of its potential returns per unit of risk. National Western Life is currently generating about 0.09 per unit of risk. If you would invest 3,642 in American Equity Investment on August 24, 2024 and sell it today you would earn a total of 1,733 from holding American Equity Investment or generate 47.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 24.53% |
| Values | Daily Returns |
American Equity Investment vs. National Western Life
Performance |
| Timeline |
| American Equity Inve |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| National Western Life |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
American Equity and National Western Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Equity and National Western
The main advantage of trading using opposite American Equity and National Western positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Equity position performs unexpectedly, National Western 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 National Western will offset losses from the drop in National Western's long position.| American Equity vs. MetLife Preferred Stock | American Equity vs. Prudential Public Limited | American Equity vs. MetLife Preferred Stock | American Equity vs. Jackson Financial |
| National Western vs. MetLife Preferred Stock | National Western vs. Prudential Public Limited | National Western vs. CNO Financial Group | National Western vs. FG Annuities Life |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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