Correlation Between Perceptive Capital and American Financial

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

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

Diversification Opportunities for Perceptive Capital and American Financial

-0.5

Correlation Coefficient

Perceptive Capital  American Financial

Very good diversification

The 3 months correlation between Perceptive and American is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Perceptive Capital Solutions and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial and Perceptive Capital 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 Perceptive Capital Solutions 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 Perceptive Capital i.e., Perceptive Capital and American Financial go up and down completely randomly.

Pair Corralation between Perceptive Capital and American Financial

Given the investment horizon of 90 days Perceptive Capital Solutions is expected to generate 0.2 times more return on investment than American Financial. However, Perceptive Capital Solutions is 5.02 times less risky than American Financial. It trades about 0.14 of its potential returns per unit of risk. American Financial Group is currently generating about -0.08 per unit of risk. If you would invest  1,013  in Perceptive Capital Solutions on December 30, 2024 and sell it today you would earn a total of  17.00  from holding Perceptive Capital Solutions or generate 1.68% return on investment over 90 days.

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

Perceptive Capital Solutions  vs.  American Financial Group

Perceptive Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perceptive Capital Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Perceptive Capital is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 rather sound technical and fundamental indicators, American Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Perceptive Capital and American Financial

The main advantage of trading using opposite Perceptive Capital and American Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perceptive Capital 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 Perceptive Capital Solutions 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.