Correlation Between First American and Assurant

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

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

Diversification Opportunities for First American and Assurant

0.92

Correlation Coefficient

First American  Assurant

Almost no diversification

The 3 months correlation between First and Assurant is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First American and Assurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assurant and First American 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 First American are associated (or correlated) with Assurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assurant has no effect on the direction of First American i.e., First American and Assurant go up and down completely randomly.

Pair Corralation between First American and Assurant

Considering the 90-day investment horizon First American is expected to generate 1.18 times more return on investment than Assurant. However, First American is 1.18 times more volatile than Assurant. It trades about -0.03 of its potential returns per unit of risk. Assurant is currently generating about -0.1 per unit of risk. If you would invest  6,589  in First American on November 20, 2024 and sell it today you would lose (223.00) from holding First American or give up 3.38% of portfolio value over 90 days.

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

First American  vs.  Assurant

First American

Risk-Adjusted Performance

Very Weak

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

Assurant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Assurant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with First American and Assurant

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

The idea behind First American and Assurant 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.