Correlation Between Selective Insurance and American Financial
Can any of the company-specific risk be diversified away by investing in both Selective Insurance 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 Selective Insurance and American Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Selective Insurance Group and American Financial Group, you can compare the effects of market volatilities on Selective Insurance 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 Selective Insurance with a short position of American Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selective Insurance and American Financial.
Diversification Opportunities for Selective Insurance and American Financial
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Selective and American is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance 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 Selective Insurance 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 Selective Insurance 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 Selective Insurance i.e., Selective Insurance and American Financial go up and down completely randomly.
Pair Corralation between Selective Insurance and American Financial
Assuming the 90 days horizon Selective Insurance is expected to generate 2.87 times less return on investment than American Financial. But when comparing it to its historical volatility, Selective Insurance Group is 1.64 times less risky than American Financial. It trades about 0.06 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 12,372 in American Financial Group on September 1, 2024 and sell it today you would earn a total of 2,314 from holding American Financial Group or generate 18.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Selective Insurance Group vs. American Financial Group
Performance |
| Timeline |
| Selective Insurance |
| American Financial |
Selective Insurance and American Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Selective Insurance and American Financial
The main advantage of trading using opposite Selective Insurance and American Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selective Insurance 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.| Selective Insurance vs. Brighthouse Financial | Selective Insurance vs. First Citizens BancShares | Selective Insurance vs. Northern Trust | Selective Insurance vs. Dime Community Bancshares |
| 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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