Correlation Between Primerica and American Equity

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

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

Diversification Opportunities for Primerica and American Equity

0.74

Correlation Coefficient

Primerica  American Equity

Poor diversification

The 3 months correlation between Primerica and American is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Primerica and American Equity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Equity Inve and Primerica 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 Primerica are associated (or correlated) with American Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Equity Inve has no effect on the direction of Primerica i.e., Primerica and American Equity go up and down completely randomly.

Pair Corralation between Primerica and American Equity

If you would invest  25,669  in Primerica on September 16, 2024 and sell it today you would earn a total of  2,447  from holding Primerica or generate 9.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

Primerica  vs.  American Equity Investment

Primerica

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Primerica are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Primerica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Equity Inve

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Primerica and American Equity

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

The idea behind Primerica and American Equity Investment 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.