Correlation Between American Equity and Aflac Incorporated
Can any of the company-specific risk be diversified away by investing in both American Equity and Aflac Incorporated 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 Equity and Aflac Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Equity Investment and Aflac Incorporated, you can compare the effects of market volatilities on American Equity and Aflac Incorporated 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 Equity with a short position of Aflac Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Equity and Aflac Incorporated.
Diversification Opportunities for American Equity and Aflac Incorporated
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Aflac is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated and American Equity 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 Equity Investment are associated (or correlated) with Aflac Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aflac Incorporated has no effect on the direction of American Equity i.e., American Equity and Aflac Incorporated go up and down completely randomly.
Pair Corralation between American Equity and Aflac Incorporated
Considering the 90-day investment horizon American Equity Investment is expected to generate 1.19 times more return on investment than Aflac Incorporated. However, American Equity is 1.19 times more volatile than Aflac Incorporated. It trades about 0.11 of its potential returns per unit of risk. Aflac Incorporated is currently generating about 0.09 per unit of risk. If you would invest 3,946 in American Equity Investment on January 19, 2024 and sell it today you would earn a total of 1,568 from holding American Equity Investment or generate 39.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.56% |
| Values | Daily Returns |
American Equity Investment vs. Aflac Incorporated
Performance |
| Timeline |
| American Equity Inve |
| Aflac Incorporated |
American Equity and Aflac Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Equity and Aflac Incorporated
The main advantage of trading using opposite American Equity and Aflac Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Equity position performs unexpectedly, Aflac Incorporated 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 Aflac Incorporated will offset losses from the drop in Aflac Incorporated's long position.| American Equity vs. MetLife Preferred Stock | American Equity vs. National Western Life | American Equity vs. Prudential Public Limited | American Equity vs. MetLife Preferred Stock |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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