Correlation Between Atlantic American and Life Insurance

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

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

Diversification Opportunities for Atlantic American and Life Insurance

0.51

Correlation Coefficient

Atlantic American  Life Insurance

Very weak diversification

The 3 months correlation between Atlantic and Life is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic American and Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Insurance 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 Life Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Insurance has no effect on the direction of Atlantic American i.e., Atlantic American and Life Insurance go up and down completely randomly.

Pair Corralation between Atlantic American and Life Insurance

Given the investment horizon of 90 days Atlantic American is expected to generate 0.58 times more return on investment than Life Insurance. However, Atlantic American is 1.73 times less risky than Life Insurance. It trades about -0.02 of its potential returns per unit of risk. Life Insurance is currently generating about -0.19 per unit of risk. If you would invest  148.00  in Atlantic American on December 20, 2024 and sell it today you would lose (8.00) from holding Atlantic American or give up 5.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Atlantic American  vs.  Life Insurance

Atlantic American

Risk-Adjusted Performance

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.

Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Atlantic American and Life Insurance

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

The idea behind Atlantic American and Life Insurance 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.