Correlation Between Emerge Capital and Aflac Incorporated

Can any of the company-specific risk be diversified away by investing in both Emerge Capital 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 Emerge Capital and Aflac Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Emerge Capital Management and Aflac Incorporated, you can compare the effects of market volatilities on Emerge Capital 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 Emerge Capital with a short position of Aflac Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerge Capital and Aflac Incorporated.

Diversification Opportunities for Emerge Capital and Aflac Incorporated

0.0

Correlation Coefficient

Emerge Capital  Aflac Incorporated

Pay attention - limited upside

The 3 months correlation between Emerge and Aflac is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Emerge Capital Management and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated and Emerge Capital 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 Emerge Capital Management 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 Emerge Capital i.e., Emerge Capital and Aflac Incorporated go up and down completely randomly.

Pair Corralation between Emerge Capital and Aflac Incorporated

Given the investment horizon of 90 days Emerge Capital is expected to generate 6.09 times less return on investment than Aflac Incorporated. But when comparing it to its historical volatility, Emerge Capital Management is 1.09 times less risky than Aflac Incorporated. It trades about 0.01 of its potential returns per unit of risk. Aflac Incorporated is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,809  in Aflac Incorporated on January 20, 2024 and sell it today you would earn a total of  2,289  from holding Aflac Incorporated or generate 39.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	44.84%
Values	Daily Returns

Emerge Capital Management  vs.  Aflac Incorporated

Emerge Capital Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emerge Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Emerge Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Aflac Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aflac Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Aflac Incorporated is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Emerge Capital and Aflac Incorporated

The main advantage of trading using opposite Emerge Capital and Aflac Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerge Capital 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.

The idea behind Emerge Capital Management and Aflac Incorporated 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.