Correlation Between Office Properties and American Financial

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

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

Diversification Opportunities for Office Properties and American Financial

0.52

Correlation Coefficient

Office Properties  American Financial

Very weak diversification

The 3 months correlation between Office and American is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial and Office Properties 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 Office Properties Income are associated (or correlated) with American Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Financial has no effect on the direction of Office Properties i.e., Office Properties and American Financial go up and down completely randomly.

Pair Corralation between Office Properties and American Financial

Assuming the 90 days horizon Office Properties is expected to generate 1.95 times less return on investment than American Financial. In addition to that, Office Properties is 5.4 times more volatile than American Financial Group. It trades about 0.0 of its total potential returns per unit of risk. American Financial Group is currently generating about 0.03 per unit of volatility. If you would invest  2,466  in American Financial Group on September 2, 2024 and sell it today you would earn a total of  26.00  from holding American Financial Group or generate 1.05% return on investment over 90 days.

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

Office Properties Income  vs.  American Financial Group

Office Properties Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

American Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Financial Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, American Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Office Properties and American Financial

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

The idea behind Office Properties Income and American Financial 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..