Correlation Between Genworth Financial and Aflac Incorporated

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

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

Diversification Opportunities for Genworth Financial and Aflac Incorporated

0.18

Correlation Coefficient

Genworth Financial  Aflac Incorporated

Average diversification

The 3 months correlation between Genworth and Aflac is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Genworth Financial and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated and Genworth Financial 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 Genworth Financial are associated (or correlated) with Aflac Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aflac Incorporated has no effect on the direction of Genworth Financial i.e., Genworth Financial and Aflac Incorporated go up and down completely randomly.

Pair Corralation between Genworth Financial and Aflac Incorporated

Considering the 90-day investment horizon Genworth Financial is expected to generate 1.36 times less return on investment than Aflac Incorporated. In addition to that, Genworth Financial is 1.61 times more volatile than Aflac Incorporated. It trades about 0.05 of its total potential returns per unit of risk. Aflac Incorporated is currently generating about 0.1 per unit of volatility. If you would invest  5,893  in Aflac Incorporated on October 5, 2024 and sell it today you would earn a total of  4,343  from holding Aflac Incorporated or generate 73.7% return on investment over 90 days.

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

Genworth Financial  vs.  Aflac Incorporated

Genworth Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Genworth Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Genworth Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Aflac Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aflac Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Genworth Financial and Aflac Incorporated

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

The idea behind Genworth Financial and Aflac Incorporated 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.