Correlation Between American Financial and Assured Guaranty
Can any of the company-specific risk be diversified away by investing in both American Financial and Assured Guaranty 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 Financial and Assured Guaranty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Financial Group and Assured Guaranty, you can compare the effects of market volatilities on American Financial and Assured Guaranty 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 Financial with a short position of Assured Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Financial and Assured Guaranty.
Diversification Opportunities for American Financial and Assured Guaranty
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Assured is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty and American Financial 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 Financial Group are associated (or correlated) with Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of American Financial i.e., American Financial and Assured Guaranty go up and down completely randomly.
Pair Corralation between American Financial and Assured Guaranty
Considering the 90-day investment horizon American Financial Group is expected to generate 0.77 times more return on investment than Assured Guaranty. However, American Financial Group is 1.29 times less risky than Assured Guaranty. It trades about 0.26 of its potential returns per unit of risk. Assured Guaranty is currently generating about 0.19 per unit of risk. If you would invest 12,830 in American Financial Group on August 24, 2024 and sell it today you would earn a total of 1,246 from holding American Financial Group or generate 9.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Financial Group vs. Assured Guaranty
Performance |
| Timeline |
| American Financial |
| Assured Guaranty |
American Financial and Assured Guaranty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Financial and Assured Guaranty
The main advantage of trading using opposite American Financial and Assured Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Financial position performs unexpectedly, Assured Guaranty 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 Assured Guaranty will offset losses from the drop in Assured Guaranty's long position.| American Financial vs. Amtech Systems | American Financial vs. Gold Fields Ltd | American Financial vs. Aegean Airlines SA | American Financial vs. Merck Company |
| Assured Guaranty vs. AXIS Capital Holdings | Assured Guaranty vs. MBIA Inc | Assured Guaranty vs. Assurant | Assured Guaranty vs. American Financial Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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