Correlation Between Aflac Incorporated and Citizens

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

By analyzing existing cross correlation between Aflac Incorporated and Citizens, you can compare the effects of market volatilities on Aflac Incorporated and Citizens 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 Aflac Incorporated with a short position of Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aflac Incorporated and Citizens.

Diversification Opportunities for Aflac Incorporated and Citizens

0.25

Correlation Coefficient

Aflac Incorporated  Citizens

Modest diversification

The 3 months correlation between Aflac and Citizens is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Aflac Incorporated and Citizens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens and Aflac Incorporated 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 Aflac Incorporated are associated (or correlated) with Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens has no effect on the direction of Aflac Incorporated i.e., Aflac Incorporated and Citizens go up and down completely randomly.

Pair Corralation between Aflac Incorporated and Citizens

Considering the 90-day investment horizon Aflac Incorporated is expected to generate 2.0 times less return on investment than Citizens. But when comparing it to its historical volatility, Aflac Incorporated is 3.16 times less risky than Citizens. It trades about 0.08 of its potential returns per unit of risk. Citizens is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  297.00  in Citizens on November 20, 2024 and sell it today you would earn a total of  240.00  from holding Citizens or generate 80.81% return on investment over 90 days.

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

Aflac Incorporated  vs.  Citizens

Aflac Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aflac Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Citizens

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Citizens sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aflac Incorporated and Citizens

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

The idea behind Aflac Incorporated and Citizens 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.