Correlation Between Midwest Holding and Aflac Incorporated

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

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

Diversification Opportunities for Midwest Holding and Aflac Incorporated

0.08

Correlation Coefficient

Midwest Holding  Aflac Incorporated

Significant diversification

The 3 months correlation between Midwest and Aflac is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Midwest Holding and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated and Midwest Holding 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 Midwest Holding 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 Midwest Holding i.e., Midwest Holding and Aflac Incorporated go up and down completely randomly.

Pair Corralation between Midwest Holding and Aflac Incorporated

Given the investment horizon of 90 days Midwest Holding is expected to generate 5.83 times more return on investment than Aflac Incorporated. However, Midwest Holding is 5.83 times more volatile than Aflac Incorporated. It trades about 0.09 of its potential returns per unit of risk. Aflac Incorporated is currently generating about 0.07 per unit of risk. If you would invest  1,274  in Midwest Holding on September 20, 2024 and sell it today you would earn a total of  1,377  from holding Midwest Holding or generate 108.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	28.43%
Values	Daily Returns

Midwest Holding  vs.  Aflac Incorporated

Midwest Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Midwest Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Midwest Holding is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private 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 quite persistent technical and fundamental indicators, Aflac Incorporated is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Midwest Holding and Aflac Incorporated

The main advantage of trading using opposite Midwest Holding and Aflac Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midwest Holding 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 Midwest Holding 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.