Correlation Between American International and Assicurazioni Generali

Can any of the company-specific risk be diversified away by investing in both American International and Assicurazioni Generali 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 Assicurazioni Generali 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 Assicurazioni Generali SpA, you can compare the effects of market volatilities on American International and Assicurazioni Generali 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 Assicurazioni Generali. Check out your portfolio center. Please also check ongoing floating volatility patterns of American International and Assicurazioni Generali.

Diversification Opportunities for American International and Assicurazioni Generali

0.72

Correlation Coefficient

American International  Assicurazioni Generali

Poor diversification

The 3 months correlation between American and Assicurazioni is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and Assicurazioni Generali SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assicurazioni Generali 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 Assicurazioni Generali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assicurazioni Generali has no effect on the direction of American International i.e., American International and Assicurazioni Generali go up and down completely randomly.

Pair Corralation between American International and Assicurazioni Generali

Considering the 90-day investment horizon American International Group is expected to under-perform the Assicurazioni Generali. But the stock apears to be less risky and, when comparing its historical volatility, American International Group is 2.8 times less risky than Assicurazioni Generali. The stock trades about -0.15 of its potential returns per unit of risk. The Assicurazioni Generali SpA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,166  in Assicurazioni Generali SpA on January 19, 2024 and sell it today you would earn a total of  334.00  from holding Assicurazioni Generali SpA or generate 15.42% return on investment over 90 days.

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

American International Group  vs.  Assicurazioni Generali SpA

American International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American International Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, American International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Assicurazioni Generali

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Assicurazioni Generali SpA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Assicurazioni Generali reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American International and Assicurazioni Generali

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

The idea behind American International Group and Assicurazioni Generali SpA 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.

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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.