Correlation Between American International and Federal National
Can any of the company-specific risk be diversified away by investing in both American International and Federal National 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 International and Federal National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American International Group and Federal National Mortgage, you can compare the effects of market volatilities on American International and Federal National 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 International with a short position of Federal National. Check out your portfolio center. Please also check ongoing floating volatility patterns of American International and Federal National.
Diversification Opportunities for American International and Federal National
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Federal is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and Federal National Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal National Mortgage and American International 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 International Group are associated (or correlated) with Federal National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal National Mortgage has no effect on the direction of American International i.e., American International and Federal National go up and down completely randomly.
Pair Corralation between American International and Federal National
Considering the 90-day investment horizon American International Group is expected to under-perform the Federal National. But the stock apears to be less risky and, when comparing its historical volatility, American International Group is 14.63 times less risky than Federal National. The stock trades about -0.09 of its potential returns per unit of risk. The Federal National Mortgage is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 519.00 in Federal National Mortgage on August 28, 2024 and sell it today you would earn a total of 581.00 from holding Federal National Mortgage or generate 111.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American International Group vs. Federal National Mortgage
Performance |
| Timeline |
| American International |
| Federal National Mortgage |
American International and Federal National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American International and Federal National
The main advantage of trading using opposite American International and Federal National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American International position performs unexpectedly, Federal National 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 Federal National will offset losses from the drop in Federal National's long position.| American International vs. Axa Equitable Holdings | American International vs. Arch Capital Group | American International vs. Old Republic International | American International vs. Sun Life Financial |
| Federal National vs. Federal Home Loan | Federal National vs. Federal Hme 655 | Federal National vs. Federal National Mortgage | Federal National vs. Federal National Mortgage |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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