Correlation Between American Financial and Mercury General
Can any of the company-specific risk be diversified away by investing in both American Financial and Mercury General 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 Mercury General 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 Mercury General, you can compare the effects of market volatilities on American Financial and Mercury General 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 Mercury General. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Financial and Mercury General.
Diversification Opportunities for American Financial and Mercury General
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Mercury is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Mercury General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury General 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 Mercury General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury General has no effect on the direction of American Financial i.e., American Financial and Mercury General go up and down completely randomly.
Pair Corralation between American Financial and Mercury General
Considering the 90-day investment horizon American Financial Group is expected to under-perform the Mercury General. But the stock apears to be less risky and, when comparing its historical volatility, American Financial Group is 1.77 times less risky than Mercury General. The stock trades about -0.32 of its potential returns per unit of risk. The Mercury General is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,994 in Mercury General on November 29, 2024 and sell it today you would earn a total of 413.00 from holding Mercury General or generate 8.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Financial Group vs. Mercury General
Performance |
| Timeline |
| American Financial |
| Mercury General |
American Financial and Mercury General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Financial and Mercury General
The main advantage of trading using opposite American Financial and Mercury General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Financial position performs unexpectedly, Mercury General 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 Mercury General will offset losses from the drop in Mercury General's long position.| American Financial vs. Selective Insurance Group | American Financial vs. Horace Mann Educators | American Financial vs. Kemper | American Financial vs. ProAssurance |
| Mercury General vs. Selective Insurance Group | Mercury General vs. Kemper | Mercury General vs. Argo Group International | Mercury General vs. Global Indemnity PLC |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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