Correlation Between American Financial and Office Properties

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

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

Diversification Opportunities for American Financial and Office Properties

0.04

Correlation Coefficient

American Financial  Office Properties

Significant diversification

The 3 months correlation between American and Office is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Office Properties Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Office Properties Income and American Financial 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 Financial Group are associated (or correlated) with Office Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Office Properties Income has no effect on the direction of American Financial i.e., American Financial and Office Properties go up and down completely randomly.

Pair Corralation between American Financial and Office Properties

Given the investment horizon of 90 days American Financial Group is expected to generate 0.25 times more return on investment than Office Properties. However, American Financial Group is 4.01 times less risky than Office Properties. It trades about 0.04 of its potential returns per unit of risk. Office Properties Income is currently generating about -0.08 per unit of risk. If you would invest  2,241  in American Financial Group on November 30, 2024 and sell it today you would earn a total of  29.00  from holding American Financial Group or generate 1.29% return on investment over 90 days.

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

American Financial Group  vs.  Office Properties Income

American Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Office Properties Income

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's basic 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 American Financial and Office Properties

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

The idea behind American Financial Group and Office Properties Income 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.