Correlation Between Affiliated Managers and American Financial
Can any of the company-specific risk be diversified away by investing in both Affiliated Managers 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 Affiliated Managers and American Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Affiliated Managers Group and American Financial Group, you can compare the effects of market volatilities on Affiliated Managers 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 Affiliated Managers with a short position of American Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affiliated Managers and American Financial.
Diversification Opportunities for Affiliated Managers and American Financial
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Affiliated and American is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers Group and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial and Affiliated Managers 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 Affiliated Managers Group 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 Affiliated Managers i.e., Affiliated Managers and American Financial go up and down completely randomly.
Pair Corralation between Affiliated Managers and American Financial
Considering the 90-day investment horizon Affiliated Managers Group is expected to under-perform the American Financial. But the stock apears to be less risky and, when comparing its historical volatility, Affiliated Managers Group is 1.51 times less risky than American Financial. The stock trades about -0.35 of its potential returns per unit of risk. The American Financial Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 2,009 in American Financial Group on August 31, 2024 and sell it today you would lose (11.00) from holding American Financial Group or give up 0.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Affiliated Managers Group vs. American Financial Group
Performance |
| Timeline |
| Affiliated Managers |
| American Financial |
Affiliated Managers and American Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Affiliated Managers and American Financial
The main advantage of trading using opposite Affiliated Managers and American Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affiliated Managers 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.| Affiliated Managers vs. DBA Sempra 5750 | Affiliated Managers vs. CMS Energy Corp | Affiliated Managers vs. American Financial Group | Affiliated Managers vs. National Rural Utilities |
| American Financial vs. American Financial Group | American Financial vs. American Financial Group | American Financial vs. American Financial Group | American Financial vs. Reinsurance Group of |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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