Correlation Between Globe Life and American National

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

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

Diversification Opportunities for Globe Life and American National

0.2

Correlation Coefficient

Globe Life  American National

Modest diversification

The 3 months correlation between Globe and American is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Globe Life and American National Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American National and Globe 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 Globe Life are associated (or correlated) with American National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American National has no effect on the direction of Globe Life i.e., Globe Life and American National go up and down completely randomly.

Pair Corralation between Globe Life and American National

Allowing for the 90-day total investment horizon Globe Life is expected to generate 1.57 times more return on investment than American National. However, Globe Life is 1.57 times more volatile than American National Group. It trades about -0.03 of its potential returns per unit of risk. American National Group is currently generating about -0.07 per unit of risk. If you would invest  11,048  in Globe Life on September 23, 2024 and sell it today you would lose (109.00) from holding Globe Life or give up 0.99% of portfolio value over 90 days.

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

Globe Life  vs.  American National Group

Globe Life

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Globe Life are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Globe Life is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

American National

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American National Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, American National is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Globe Life and American National

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

The idea behind Globe Life and American National Group 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.