Correlation Between Enstar Group and American International

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

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

Diversification Opportunities for Enstar Group and American International

0.57

Correlation Coefficient

Enstar Group  American International

Very weak diversification

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

Pair Corralation between Enstar Group and American International

Given the investment horizon of 90 days Enstar Group is expected to generate 1.08 times less return on investment than American International. But when comparing it to its historical volatility, Enstar Group Limited is 5.29 times less risky than American International. It trades about 0.18 of its potential returns per unit of risk. American International Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,646  in American International Group on November 28, 2024 and sell it today you would earn a total of  172.00  from holding American International Group or generate 2.25% return on investment over 90 days.

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

Enstar Group Limited  vs.  American International Group

Enstar Group Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enstar Group Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Enstar Group is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

American International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American International Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, American International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Enstar Group and American International

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

The idea behind Enstar Group Limited and American International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.