Correlation Between American International and Target
Can any of the company-specific risk be diversified away by investing in both American International and Target 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 International and Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American International Group and Target, you can compare the effects of market volatilities on American International and Target 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 International with a short position of Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of American International and Target.
Diversification Opportunities for American International and Target
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Target is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and American International 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 International Group are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of American International i.e., American International and Target go up and down completely randomly.
Pair Corralation between American International and Target
Considering the 90-day investment horizon American International Group is expected to generate 0.68 times more return on investment than Target. However, American International Group is 1.46 times less risky than Target. It trades about 0.04 of its potential returns per unit of risk. Target is currently generating about -0.01 per unit of risk. If you would invest 5,691 in American International Group on January 27, 2024 and sell it today you would earn a total of 1,772 from holding American International Group or generate 31.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American International Group vs. Target
Performance |
| Timeline |
| American International |
| Target |
American International and Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American International and Target
The main advantage of trading using opposite American International and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American International position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.| 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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