Correlation Between American Financial and CNO Financial

Can any of the company-specific risk be diversified away by investing in both American Financial and CNO Financial 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 CNO Financial 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 CNO Financial Group, you can compare the effects of market volatilities on American Financial and CNO Financial 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 CNO Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Financial and CNO Financial.

Diversification Opportunities for American Financial and CNO Financial

0.84

Correlation Coefficient

American Financial  CNO Financial

Very poor diversification

The 3 months correlation between American and CNO is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and CNO Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNO Financial Group 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 CNO Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNO Financial Group has no effect on the direction of American Financial i.e., American Financial and CNO Financial go up and down completely randomly.

Pair Corralation between American Financial and CNO Financial

Given the investment horizon of 90 days American Financial Group is expected to under-perform the CNO Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, American Financial Group is 1.62 times less risky than CNO Financial. The preferred stock trades about -0.15 of its potential returns per unit of risk. The CNO Financial Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,997  in CNO Financial Group on November 19, 2024 and sell it today you would earn a total of  6.00  from holding CNO Financial Group or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.67%
Values	Daily Returns

American Financial Group  vs.  CNO Financial Group

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. In spite of latest weak performance, the Preferred Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

CNO Financial Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days CNO Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CNO Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Financial and CNO Financial

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

The idea behind American Financial Group and CNO Financial Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.