Correlation Between Chubb and American Financial
Can any of the company-specific risk be diversified away by investing in both Chubb and American Financial 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 Chubb and American Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chubb and American Financial Group, you can compare the effects of market volatilities on Chubb and American Financial 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 Chubb with a short position of American Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chubb and American Financial.
Diversification Opportunities for Chubb and American Financial
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Chubb and American is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial and Chubb 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 Chubb are associated (or correlated) with American Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Financial has no effect on the direction of Chubb i.e., Chubb and American Financial go up and down completely randomly.
Pair Corralation between Chubb and American Financial
Allowing for the 90-day total investment horizon Chubb is expected to generate 1.16 times less return on investment than American Financial. But when comparing it to its historical volatility, Chubb is 1.14 times less risky than American Financial. It trades about 0.11 of its potential returns per unit of risk. American Financial Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 10,734 in American Financial Group on September 2, 2024 and sell it today you would earn a total of 3,952 from holding American Financial Group or generate 36.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chubb vs. American Financial Group
Performance |
| Timeline |
| Chubb |
| American Financial |
Chubb and American Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chubb and American Financial
The main advantage of trading using opposite Chubb and American Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chubb position performs unexpectedly, American Financial 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 American Financial will offset losses from the drop in American Financial's long position.| Chubb vs. Cincinnati Financial | Chubb vs. Aflac Incorporated | Chubb vs. Dover | Chubb vs. Franklin Resources |
| 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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