Correlation Between Chubb and American International
Can any of the company-specific risk be diversified away by investing in both Chubb and American International 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 Chubb and American International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chubb and American International Group, you can compare the effects of market volatilities on Chubb and American International 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 Chubb with a short position of American International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chubb and American International.
Diversification Opportunities for Chubb and American International
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chubb and American is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International and Chubb 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 Chubb are associated (or correlated) with American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Chubb i.e., Chubb and American International go up and down completely randomly.
Pair Corralation between Chubb and American International
Allowing for the 90-day total investment horizon Chubb is expected to generate 1.2 times less return on investment than American International. But when comparing it to its historical volatility, Chubb is 1.19 times less risky than American International. It trades about 0.16 of its potential returns per unit of risk. American International Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 5,695 in American International Group on January 24, 2024 and sell it today you would earn a total of 1,798 from holding American International Group or generate 31.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chubb vs. American International Group
Performance |
| Timeline |
| Chubb |
| American International |
Chubb and American International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chubb and American International
The main advantage of trading using opposite Chubb and American International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chubb position performs unexpectedly, American International 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 International will offset losses from the drop in American International's long position.| Chubb vs. Aquagold International | Chubb vs. Thrivent High Yield | Chubb vs. Morningstar Unconstrained Allocation | Chubb vs. Via Renewables |
| American International vs. Axa Equitable Holdings | American International vs. Arch Capital Group | American International vs. Old Republic International | American International vs. Sun Life Financial |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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