Correlation Between National Western and American Equity
Can any of the company-specific risk be diversified away by investing in both National Western and American Equity 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 National Western and American Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Western Life and American Equity Investment, you can compare the effects of market volatilities on National Western and American Equity 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 National Western with a short position of American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Western and American Equity.
Diversification Opportunities for National Western and American Equity
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and American is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding National Western Life and American Equity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Equity Inve and National Western 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 National Western Life are associated (or correlated) with American Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Equity Inve has no effect on the direction of National Western i.e., National Western and American Equity go up and down completely randomly.
Pair Corralation between National Western and American Equity
Given the investment horizon of 90 days National Western Life is expected to generate 1.12 times more return on investment than American Equity. However, National Western is 1.12 times more volatile than American Equity Investment. It trades about 0.08 of its potential returns per unit of risk. American Equity Investment is currently generating about 0.09 per unit of risk. If you would invest 21,832 in National Western Life on August 28, 2024 and sell it today you would earn a total of 28,166 from holding National Western Life or generate 129.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 39.55% |
| Values | Daily Returns |
National Western Life vs. American Equity Investment
Performance |
| Timeline |
| National Western Life |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| American Equity Inve |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
National Western and American Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Western and American Equity
The main advantage of trading using opposite National Western and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Western position performs unexpectedly, American Equity 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 Equity will offset losses from the drop in American Equity's long position.| National Western vs. MetLife Preferred Stock | National Western vs. Prudential Public Limited | National Western vs. CNO Financial Group | National Western vs. FG Annuities Life |
| American Equity vs. MetLife Preferred Stock | American Equity vs. Prudential Public Limited | American Equity vs. MetLife Preferred Stock | American Equity vs. Jackson Financial |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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