Correlation Between American Financial and Tokio Marine
Can any of the company-specific risk be diversified away by investing in both American Financial and Tokio Marine 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 Financial and Tokio Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Financial Group and Tokio Marine Holdings, you can compare the effects of market volatilities on American Financial and Tokio Marine 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 Financial with a short position of Tokio Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Financial and Tokio Marine.
Diversification Opportunities for American Financial and Tokio Marine
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Tokio is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Tokio Marine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokio Marine Holdings and American Financial 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 Financial Group are associated (or correlated) with Tokio Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokio Marine Holdings has no effect on the direction of American Financial i.e., American Financial and Tokio Marine go up and down completely randomly.
Pair Corralation between American Financial and Tokio Marine
Assuming the 90 days horizon American Financial Group is expected to generate 0.97 times more return on investment than Tokio Marine. However, American Financial Group is 1.03 times less risky than Tokio Marine. It trades about 0.4 of its potential returns per unit of risk. Tokio Marine Holdings is currently generating about 0.15 per unit of risk. If you would invest 11,644 in American Financial Group on August 29, 2024 and sell it today you would earn a total of 2,456 from holding American Financial Group or generate 21.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Financial Group vs. Tokio Marine Holdings
Performance |
| Timeline |
| American Financial |
| Tokio Marine Holdings |
American Financial and Tokio Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Financial and Tokio Marine
The main advantage of trading using opposite American Financial and Tokio Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Financial position performs unexpectedly, Tokio Marine 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 Tokio Marine will offset losses from the drop in Tokio Marine's long position.| American Financial vs. THORNEY TECHS LTD | American Financial vs. PennyMac Mortgage Investment | American Financial vs. New Residential Investment | American Financial vs. NetSol Technologies |
| Tokio Marine vs. AECOM TECHNOLOGY | Tokio Marine vs. Jacquet Metal Service | Tokio Marine vs. FANDIFI TECHNOLOGY P | Tokio Marine vs. Amkor Technology |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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