Correlation Between American Financial and Assurant

Can any of the company-specific risk be diversified away by investing in both American Financial and Assurant 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 Assurant 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 Assurant, you can compare the effects of market volatilities on American Financial and Assurant 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 Assurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Financial and Assurant.

Diversification Opportunities for American Financial and Assurant

0.87

Correlation Coefficient

American Financial  Assurant

Very poor diversification

The 3 months correlation between American and Assurant is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Assurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assurant 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 Assurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assurant has no effect on the direction of American Financial i.e., American Financial and Assurant go up and down completely randomly.

Pair Corralation between American Financial and Assurant

Given the investment horizon of 90 days American Financial is expected to generate 7.55 times less return on investment than Assurant. But when comparing it to its historical volatility, American Financial Group is 1.1 times less risky than Assurant. It trades about 0.0 of its potential returns per unit of risk. Assurant is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,031  in Assurant on September 30, 2024 and sell it today you would earn a total of  51.00  from holding Assurant or generate 2.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

American Financial Group  vs.  Assurant

American Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Assurant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Assurant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Assurant is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with American Financial and Assurant

The main advantage of trading using opposite American Financial and Assurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Financial position performs unexpectedly, Assurant 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 Assurant will offset losses from the drop in Assurant's long position.

The idea behind American Financial Group and Assurant 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.