Correlation Between AGL Energy and CNA Financial

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

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

Diversification Opportunities for AGL Energy and CNA Financial

0.0

Correlation Coefficient

AGL Energy  CNA Financial

Pay attention - limited upside

The 3 months correlation between AGL and CNA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AGL Energy Limited and CNA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNA Financial and AGL Energy 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 AGL Energy Limited are associated (or correlated) with CNA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNA Financial has no effect on the direction of AGL Energy i.e., AGL Energy and CNA Financial go up and down completely randomly.

Pair Corralation between AGL Energy and CNA Financial

If you would invest  4,668  in CNA Financial on December 18, 2024 and sell it today you would earn a total of  266.00  from holding CNA Financial or generate 5.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

AGL Energy Limited  vs.  CNA Financial

AGL Energy Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days AGL Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AGL Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CNA Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CNA Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, CNA Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with AGL Energy and CNA Financial

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

The idea behind AGL Energy Limited and CNA Financial 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.