Correlation Between Emerge Capital and American Equity

Can any of the company-specific risk be diversified away by investing in both Emerge Capital 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 Emerge Capital and American Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emerge Capital Management and American Equity Investment, you can compare the effects of market volatilities on Emerge Capital 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 Emerge Capital with a short position of American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerge Capital and American Equity.

Diversification Opportunities for Emerge Capital and American Equity

0.0

Correlation Coefficient

Emerge Capital  American Equity

Pay attention - limited upside

The 3 months correlation between Emerge and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Emerge Capital Management 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 Emerge Capital 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 Emerge Capital Management 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 Emerge Capital i.e., Emerge Capital and American Equity go up and down completely randomly.

Pair Corralation between Emerge Capital and American Equity

If you would invest  5,569  in American Equity Investment on January 29, 2024 and sell it today you would earn a total of  62.00  from holding American Equity Investment or generate 1.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Emerge Capital Management  vs.  American Equity Investment

Emerge Capital Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerge Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Emerge Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

American Equity Inve

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Equity Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, American Equity is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Emerge Capital and American Equity

The main advantage of trading using opposite Emerge Capital and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerge Capital 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.

The idea behind Emerge Capital Management and American Equity Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.