Correlation Between Mattel and American Coastal

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

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

Diversification Opportunities for Mattel and American Coastal

0.77

Correlation Coefficient

Mattel  American Coastal

Poor diversification

The 3 months correlation between Mattel and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and American Coastal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Coastal Ins and Mattel 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 Mattel Inc are associated (or correlated) with American Coastal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Coastal Ins has no effect on the direction of Mattel i.e., Mattel and American Coastal go up and down completely randomly.

Pair Corralation between Mattel and American Coastal

Considering the 90-day investment horizon Mattel Inc is expected to under-perform the American Coastal. But the stock apears to be less risky and, when comparing its historical volatility, Mattel Inc is 1.19 times less risky than American Coastal. The stock trades about -0.02 of its potential returns per unit of risk. The American Coastal Insurance is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  999.00  in American Coastal Insurance on January 30, 2025 and sell it today you would earn a total of  160.00  from holding American Coastal Insurance or generate 16.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.65%
Values	Daily Returns

Mattel Inc  vs.  American Coastal Insurance

Mattel Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

American Coastal Ins

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Coastal Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, American Coastal is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mattel and American Coastal

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

The idea behind Mattel Inc and American Coastal Insurance 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.