Correlation Between Aflac Incorporated and Chubb

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

By analyzing existing cross correlation between Aflac Incorporated and Chubb, you can compare the effects of market volatilities on Aflac Incorporated and Chubb 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 Aflac Incorporated with a short position of Chubb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aflac Incorporated and Chubb.

Diversification Opportunities for Aflac Incorporated and Chubb

0.52

Correlation Coefficient

Aflac Incorporated  Chubb

Very weak diversification

The 3 months correlation between Aflac and Chubb is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Aflac Incorporated and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and Aflac Incorporated 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 Aflac Incorporated are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of Aflac Incorporated i.e., Aflac Incorporated and Chubb go up and down completely randomly.

Pair Corralation between Aflac Incorporated and Chubb

Considering the 90-day investment horizon Aflac Incorporated is expected to generate 1.03 times less return on investment than Chubb. In addition to that, Aflac Incorporated is 1.89 times more volatile than Chubb. It trades about 0.09 of its total potential returns per unit of risk. Chubb is currently generating about 0.18 per unit of volatility. If you would invest  27,608  in Chubb on September 5, 2024 and sell it today you would earn a total of  852.00  from holding Chubb or generate 3.09% return on investment over 90 days.

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

Aflac Incorporated  vs.  Chubb

Aflac Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aflac Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Aflac Incorporated is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Chubb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chubb has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aflac Incorporated and Chubb

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

The idea behind Aflac Incorporated and Chubb 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.