Correlation Between DBA Sempra and American Financial
Can any of the company-specific risk be diversified away by investing in both DBA Sempra 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 DBA Sempra and American Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DBA Sempra 5750 and American Financial Group, you can compare the effects of market volatilities on DBA Sempra 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 DBA Sempra with a short position of American Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of DBA Sempra and American Financial.
Diversification Opportunities for DBA Sempra and American Financial
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DBA and American is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding DBA Sempra 5750 and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial and DBA Sempra 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 DBA Sempra 5750 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 DBA Sempra i.e., DBA Sempra and American Financial go up and down completely randomly.
Pair Corralation between DBA Sempra and American Financial
Given the investment horizon of 90 days DBA Sempra 5750 is expected to under-perform the American Financial. In addition to that, DBA Sempra is 1.23 times more volatile than American Financial Group. It trades about -0.21 of its total potential returns per unit of risk. American Financial Group is currently generating about -0.01 per unit of volatility. If you would invest 2,467 in American Financial Group on August 30, 2024 and sell it today you would lose (5.00) from holding American Financial Group or give up 0.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DBA Sempra 5750 vs. American Financial Group
Performance |
| Timeline |
| DBA Sempra 5750 |
| American Financial |
DBA Sempra and American Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DBA Sempra and American Financial
The main advantage of trading using opposite DBA Sempra and American Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DBA Sempra 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.| DBA Sempra vs. Southern Co | DBA Sempra vs. CMS Energy Corp | DBA Sempra vs. Affiliated Managers Group | DBA Sempra vs. Southern Co |
| American Financial vs. American Financial Group | American Financial vs. American Financial Group | American Financial vs. CMS Energy Corp | American Financial vs. American Financial Group |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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