Correlation Between TRON and AMERICAN

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

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

Diversification Opportunities for TRON and AMERICAN

-0.24

Correlation Coefficient

TRON  AMERICAN

Very good diversification

The 3 months correlation between TRON and AMERICAN is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding TRON and AMERICAN FINL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN FINL GROUP and TRON 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 TRON are associated (or correlated) with AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN FINL GROUP has no effect on the direction of TRON i.e., TRON and AMERICAN go up and down completely randomly.

Pair Corralation between TRON and AMERICAN

Assuming the 90 days trading horizon TRON is expected to generate 9.24 times more return on investment than AMERICAN. However, TRON is 9.24 times more volatile than AMERICAN FINL GROUP. It trades about 0.09 of its potential returns per unit of risk. AMERICAN FINL GROUP is currently generating about 0.05 per unit of risk. If you would invest  16.00  in TRON on October 10, 2024 and sell it today you would earn a total of  9.00  from holding TRON or generate 56.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.54%
Values	Daily Returns

TRON  vs.  AMERICAN FINL GROUP

TRON

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TRON exhibited solid returns over the last few months and may actually be approaching a breakup point.

AMERICAN FINL GROUP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMERICAN FINL GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TRON and AMERICAN

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

The idea behind TRON and AMERICAN FINL 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.