Correlation Between Atlantic American and Aflac Incorporated

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

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

Diversification Opportunities for Atlantic American and Aflac Incorporated

0.51

Correlation Coefficient

Atlantic American  Aflac Incorporated

Very weak diversification

The 3 months correlation between Atlantic and Aflac is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic American and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated and Atlantic American 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 Atlantic American 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 Atlantic American i.e., Atlantic American and Aflac Incorporated go up and down completely randomly.

Pair Corralation between Atlantic American and Aflac Incorporated

Given the investment horizon of 90 days Atlantic American is expected to generate 3.55 times more return on investment than Aflac Incorporated. However, Atlantic American is 3.55 times more volatile than Aflac Incorporated. It trades about 0.01 of its potential returns per unit of risk. Aflac Incorporated is currently generating about -0.18 per unit of risk. If you would invest  150.00  in Atlantic American on October 5, 2024 and sell it today you would lose (1.00) from holding Atlantic American or give up 0.67% of portfolio value over 90 days.

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

Atlantic American  vs.  Aflac Incorporated

Atlantic American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlantic American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Atlantic American 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 latest uncertain performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Atlantic American and Aflac Incorporated

The main advantage of trading using opposite Atlantic American and Aflac Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlantic American 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 Atlantic American 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.