Correlation Between Federal Life and Aflac Incorporated
Can any of the company-specific risk be diversified away by investing in both Federal Life 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 Federal Life and Aflac Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Life Group and Aflac Incorporated, you can compare the effects of market volatilities on Federal Life 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 Federal Life with a short position of Aflac Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Life and Aflac Incorporated.
Diversification Opportunities for Federal Life and Aflac Incorporated
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Federal and Aflac is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Federal Life Group and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated and Federal Life 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 Federal Life Group 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 Federal Life i.e., Federal Life and Aflac Incorporated go up and down completely randomly.
Pair Corralation between Federal Life and Aflac Incorporated
Given the investment horizon of 90 days Federal Life Group is expected to under-perform the Aflac Incorporated. In addition to that, Federal Life is 2.6 times more volatile than Aflac Incorporated. It trades about -0.01 of its total potential returns per unit of risk. Aflac Incorporated is currently generating about 0.05 per unit of volatility. If you would invest 6,239 in Aflac Incorporated on December 29, 2023 and sell it today you would earn a total of 2,323 from holding Aflac Incorporated or generate 37.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 42.71% |
Values | Daily Returns |
Federal Life Group vs. Aflac Incorporated
Performance |
Timeline |
Federal Life Group |
Risk-Adjusted Performance
0 of 100
Low | High |
Very Weak
Aflac Incorporated |
Federal Life and Aflac Incorporated Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Federal Life and Aflac Incorporated
The main advantage of trading using opposite Federal Life and Aflac Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Life 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.Federal Life vs. Ecolab Inc | Federal Life vs. Braskem SA Class | Federal Life vs. Eastman Chemical | Federal Life vs. Sensient Technologies |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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