Correlation Between American Financial and Entergy New

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

Diversification Opportunities for American Financial and Entergy New

0.89

Correlation Coefficient

American Financial  Entergy New

Very poor diversification

The 3 months correlation between American and Entergy is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Entergy New Orleans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy New Orleans 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 Entergy New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy New Orleans has no effect on the direction of American Financial i.e., American Financial and Entergy New go up and down completely randomly.

Pair Corralation between American Financial and Entergy New

Given the investment horizon of 90 days American Financial Group is expected to generate 1.66 times more return on investment than Entergy New. However, American Financial is 1.66 times more volatile than Entergy New Orleans. It trades about -0.18 of its potential returns per unit of risk. Entergy New Orleans is currently generating about -0.37 per unit of risk. If you would invest  1,939  in American Financial Group on October 8, 2024 and sell it today you would lose (75.00) from holding American Financial Group or give up 3.87% of portfolio value over 90 days.

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

American Financial Group  vs.  Entergy New Orleans

American Financial

Risk-Adjusted Performance

0 of 100

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 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.

Entergy New Orleans

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy New Orleans has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Pair Trading with American Financial and Entergy New

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

The idea behind American Financial Group and Entergy New Orleans 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 Global Correlations module to find global opportunities by holding instruments from different markets.