Correlation Between American Financial and W R
Can any of the company-specific risk be diversified away by investing in both American Financial and W R 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 W R 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 W R Berkley, you can compare the effects of market volatilities on American Financial and W R 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 W R. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Financial and W R.
Diversification Opportunities for American Financial and W R
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and WRB is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and W R Berkley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on W R Berkley 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 W R. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of W R Berkley has no effect on the direction of American Financial i.e., American Financial and W R go up and down completely randomly.
Pair Corralation between American Financial and W R
Considering the 90-day investment horizon American Financial is expected to generate 1.3 times less return on investment than W R. But when comparing it to its historical volatility, American Financial Group is 1.04 times less risky than W R. It trades about 0.04 of its potential returns per unit of risk. W R Berkley is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,742 in W R Berkley on August 26, 2024 and sell it today you would earn a total of 1,485 from holding W R Berkley or generate 31.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Financial Group vs. W R Berkley
Performance |
| Timeline |
| American Financial |
| W R Berkley |
American Financial and W R Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Financial and W R
The main advantage of trading using opposite American Financial and W R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Financial position performs unexpectedly, W R 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 W R will offset losses from the drop in W R'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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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