Correlation Between Assurant and Arconic

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

By analyzing existing cross correlation between Assurant and Arconic 59 percent, you can compare the effects of market volatilities on Assurant and Arconic 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 Assurant with a short position of Arconic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Assurant and Arconic.

Diversification Opportunities for Assurant and Arconic

-0.57

Correlation Coefficient

Assurant  Arconic

Excellent diversification

The 3 months correlation between Assurant and Arconic is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Assurant and Arconic 59 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arconic 59 percent and Assurant 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 Assurant are associated (or correlated) with Arconic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arconic 59 percent has no effect on the direction of Assurant i.e., Assurant and Arconic go up and down completely randomly.

Pair Corralation between Assurant and Arconic

Considering the 90-day investment horizon Assurant is expected to generate 8.33 times more return on investment than Arconic. However, Assurant is 8.33 times more volatile than Arconic 59 percent. It trades about 0.14 of its potential returns per unit of risk. Arconic 59 percent is currently generating about -0.16 per unit of risk. If you would invest  19,155  in Assurant on September 13, 2024 and sell it today you would earn a total of  2,538  from holding Assurant or generate 13.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Assurant  vs.  Arconic 59 percent

Assurant

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Assurant are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward indicators, Assurant showed solid returns over the last few months and may actually be approaching a breakup point.

Arconic 59 percent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arconic 59 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Arconic is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Assurant and Arconic

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

The idea behind Assurant and Arconic 59 percent 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.