Correlation Between Melar Acquisition and American Financial

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

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

Diversification Opportunities for Melar Acquisition and American Financial

-0.68

Correlation Coefficient

Melar Acquisition  American Financial

Excellent diversification

The 3 months correlation between Melar and American is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Melar Acquisition Corp and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial and Melar Acquisition 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 Melar Acquisition Corp 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 Melar Acquisition i.e., Melar Acquisition and American Financial go up and down completely randomly.

Pair Corralation between Melar Acquisition and American Financial

Given the investment horizon of 90 days Melar Acquisition Corp is expected to generate 0.26 times more return on investment than American Financial. However, Melar Acquisition Corp is 3.83 times less risky than American Financial. It trades about 0.09 of its potential returns per unit of risk. American Financial Group is currently generating about -0.14 per unit of risk. If you would invest  1,004  in Melar Acquisition Corp on November 29, 2024 and sell it today you would earn a total of  14.00  from holding Melar Acquisition Corp or generate 1.39% return on investment over 90 days.

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

Melar Acquisition Corp  vs.  American Financial Group

Melar Acquisition Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Melar Acquisition Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Melar Acquisition is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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. In spite of latest weak performance, the Stock's technical and fundamental 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 Melar Acquisition and American Financial

The main advantage of trading using opposite Melar Acquisition and American Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melar Acquisition 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 Melar Acquisition Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.