Correlation Between American Equity and National Western

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

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

Diversification Opportunities for American Equity and National Western

0.71

Correlation Coefficient

American Equity  National Western

Poor diversification

The 3 months correlation between American and National is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment and National Western Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Western Life and American Equity 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 American Equity Investment are associated (or correlated) with National Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Western Life has no effect on the direction of American Equity i.e., American Equity and National Western go up and down completely randomly.

Pair Corralation between American Equity and National Western

Considering the 90-day investment horizon American Equity Investment is expected to generate 0.95 times more return on investment than National Western. However, American Equity Investment is 1.05 times less risky than National Western. It trades about 0.09 of its potential returns per unit of risk. National Western Life is currently generating about 0.06 per unit of risk. If you would invest  3,941  in American Equity Investment on September 5, 2024 and sell it today you would earn a total of  1,434  from holding American Equity Investment or generate 36.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	38.62%
Values	Daily Returns

American Equity Investment  vs.  National Western Life

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.

National Western Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Western Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, National Western is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with American Equity and National Western

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

The idea behind American Equity Investment and National Western Life 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.