Correlation Between American Financial and Markel
Can any of the company-specific risk be diversified away by investing in both American Financial and Markel 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 Markel 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 Markel, you can compare the effects of market volatilities on American Financial and Markel 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 Markel. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Financial and Markel.
Diversification Opportunities for American Financial and Markel
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Markel is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Markel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markel 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 Markel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markel has no effect on the direction of American Financial i.e., American Financial and Markel go up and down completely randomly.
Pair Corralation between American Financial and Markel
Considering the 90-day investment horizon American Financial Group is expected to generate 1.04 times more return on investment than Markel. However, American Financial is 1.04 times more volatile than Markel. It trades about 0.49 of its potential returns per unit of risk. Markel is currently generating about 0.37 per unit of risk. If you would invest 12,631 in American Financial Group on August 27, 2024 and sell it today you would earn a total of 2,277 from holding American Financial Group or generate 18.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Financial Group vs. Markel
Performance |
| Timeline |
| American Financial |
| Markel |
American Financial and Markel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Financial and Markel
The main advantage of trading using opposite American Financial and Markel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Financial position performs unexpectedly, Markel 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 Markel will offset losses from the drop in Markel's long position.| American Financial vs. Selective Insurance Group | American Financial vs. Horace Mann Educators | American Financial vs. Kemper | American Financial vs. ProAssurance |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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