Correlation Between Loews Corp and American Coastal

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

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

Diversification Opportunities for Loews Corp and American Coastal

-0.4

Correlation Coefficient

Loews Corp  American Coastal

Very good diversification

The 3 months correlation between Loews and American is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Loews Corp and American Coastal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Coastal Ins and Loews Corp 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 Loews Corp are associated (or correlated) with American Coastal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Coastal Ins has no effect on the direction of Loews Corp i.e., Loews Corp and American Coastal go up and down completely randomly.

Pair Corralation between Loews Corp and American Coastal

Taking into account the 90-day investment horizon Loews Corp is expected to generate 0.49 times more return on investment than American Coastal. However, Loews Corp is 2.04 times less risky than American Coastal. It trades about 0.12 of its potential returns per unit of risk. American Coastal Insurance is currently generating about -0.06 per unit of risk. If you would invest  8,433  in Loews Corp on December 28, 2024 and sell it today you would earn a total of  707.00  from holding Loews Corp or generate 8.38% return on investment over 90 days.

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

Loews Corp  vs.  American Coastal Insurance

Loews Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating essential indicators, Loews Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

American Coastal Ins

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Coastal Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Loews Corp and American Coastal

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

The idea behind Loews Corp and American Coastal Insurance 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 Transaction History module to view history of all your transactions and understand their impact on performance.