Correlation Between Argo Group and American Financial

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

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

Diversification Opportunities for Argo Group and American Financial

-0.47

Correlation Coefficient

Argo Group  American Financial

Very good diversification

The 3 months correlation between Argo and American is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Argo Group International and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial and Argo Group 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 Argo Group International are associated (or correlated) with American Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Financial has no effect on the direction of Argo Group i.e., Argo Group and American Financial go up and down completely randomly.

Pair Corralation between Argo Group and American Financial

Assuming the 90 days trading horizon Argo Group International is expected to generate 0.09 times more return on investment than American Financial. However, Argo Group International is 10.85 times less risky than American Financial. It trades about 0.24 of its potential returns per unit of risk. American Financial Group is currently generating about -0.04 per unit of risk. If you would invest  2,455  in Argo Group International on December 29, 2024 and sell it today you would earn a total of  47.00  from holding Argo Group International or generate 1.91% return on investment over 90 days.

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

Argo Group International  vs.  American Financial Group

Argo Group International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Argo Group International are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Argo Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

American Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, American Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Argo Group and American Financial

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

The idea behind Argo Group International and American Financial Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.