Correlation Between Aig Government and Financial Industries

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

By analyzing existing cross correlation between Aig Government Money and Financial Industries Fund, you can compare the effects of market volatilities on Aig Government and Financial Industries 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 Aig Government with a short position of Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aig Government and Financial Industries.

Diversification Opportunities for Aig Government and Financial Industries

0.79

Correlation Coefficient

Aig Government  Financial Industries

Poor diversification

The 3 months correlation between Aig and Financial is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Aig Government Money and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and Aig Government 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 Aig Government Money are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Aig Government i.e., Aig Government and Financial Industries go up and down completely randomly.

Pair Corralation between Aig Government and Financial Industries

Assuming the 90 days horizon Aig Government is expected to generate 3.32 times less return on investment than Financial Industries. But when comparing it to its historical volatility, Aig Government Money is 8.13 times less risky than Financial Industries. It trades about 0.26 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,798  in Financial Industries Fund on May 4, 2025 and sell it today you would earn a total of  95.00  from holding Financial Industries Fund or generate 5.28% return on investment over 90 days.

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

Aig Government Money  vs.  Financial Industries Fund

Aig Government Money

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aig Government Money are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aig Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financial Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Industries Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Financial Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aig Government and Financial Industries

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

The idea behind Aig Government Money and Financial Industries Fund 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.