Correlation Between American International and Federal Home

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

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

Diversification Opportunities for American International and Federal Home

0.25

Correlation Coefficient

American International  Federal Home

Modest diversification

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

Pair Corralation between American International and Federal Home

Considering the 90-day investment horizon American International is expected to generate 4.56 times less return on investment than Federal Home. But when comparing it to its historical volatility, American International Group is 6.18 times less risky than Federal Home. It trades about 0.2 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  332.00  in Federal Home Loan on December 29, 2024 and sell it today you would earn a total of  240.00  from holding Federal Home Loan or generate 72.29% return on investment over 90 days.

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

American International Group  vs.  Federal Home Loan

American International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American International Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, American International reported solid returns over the last few months and may actually be approaching a breakup point.

Federal Home Loan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Federal Home exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American International and Federal Home

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

The idea behind American International Group and Federal Home Loan 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.