Correlation Between AMERISAFE and National Western

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

By analyzing existing cross correlation between AMERISAFE and National Western Life, you can compare the effects of market volatilities on AMERISAFE and National Western 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 AMERISAFE with a short position of National Western. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMERISAFE and National Western.

Diversification Opportunities for AMERISAFE and National Western

0.7

Correlation Coefficient

AMERISAFE  National Western

Poor diversification

The 3 months correlation between AMERISAFE and National is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AMERISAFE and National Western Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Western Life and AMERISAFE 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 AMERISAFE are associated (or correlated) with National Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Western Life has no effect on the direction of AMERISAFE i.e., AMERISAFE and National Western go up and down completely randomly.

Pair Corralation between AMERISAFE and National Western

If you would invest  4,943  in AMERISAFE on September 2, 2024 and sell it today you would earn a total of  959.00  from holding AMERISAFE or generate 19.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

AMERISAFE  vs.  National Western Life

AMERISAFE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AMERISAFE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, AMERISAFE reported solid returns over the last few months and may actually be approaching a breakup point.

National Western Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Western Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, National Western is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with AMERISAFE and National Western

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

The idea behind AMERISAFE and National Western Life 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.