Correlation Between International Consolidated and American Financial
Can any of the company-specific risk be diversified away by investing in both International Consolidated 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 International Consolidated and American Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Consolidated Airlines and American Financial Group, you can compare the effects of market volatilities on International Consolidated 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 International Consolidated with a short position of American Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Consolidated and American Financial.
Diversification Opportunities for International Consolidated and American Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and American is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial and International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and American Financial go up and down completely randomly.
Pair Corralation between International Consolidated and American Financial
Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.45 times more return on investment than American Financial. However, International Consolidated is 1.45 times more volatile than American Financial Group. It trades about 0.13 of its potential returns per unit of risk. American Financial Group is currently generating about 0.09 per unit of risk. If you would invest 181.00 in International Consolidated Airlines on September 12, 2024 and sell it today you would earn a total of 157.00 from holding International Consolidated Airlines or generate 86.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Consolidated Air vs. American Financial Group
Performance |
| Timeline |
| International Consolidated |
| American Financial |
International Consolidated and American Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Consolidated and American Financial
The main advantage of trading using opposite International Consolidated and American Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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.The idea behind International Consolidated Airlines and American Financial Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| American Financial vs. AEGEAN AIRLINES | American Financial vs. International Consolidated Airlines | American Financial vs. Aegean Airlines SA | American Financial vs. SINGAPORE AIRLINES |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |