Correlation Between Arch Capital and Bowhead Specialty
Can any of the company-specific risk be diversified away by investing in both Arch Capital and Bowhead Specialty 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 Arch Capital and Bowhead Specialty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arch Capital Group and Bowhead Specialty Holdings, you can compare the effects of market volatilities on Arch Capital and Bowhead Specialty 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 Arch Capital with a short position of Bowhead Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and Bowhead Specialty.
Diversification Opportunities for Arch Capital and Bowhead Specialty
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Arch and Bowhead is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Bowhead Specialty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowhead Specialty and Arch 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 Arch Capital Group are associated (or correlated) with Bowhead Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowhead Specialty has no effect on the direction of Arch Capital i.e., Arch Capital and Bowhead Specialty go up and down completely randomly.
Pair Corralation between Arch Capital and Bowhead Specialty
Given the investment horizon of 90 days Arch Capital is expected to generate 5.99 times less return on investment than Bowhead Specialty. But when comparing it to its historical volatility, Arch Capital Group is 1.42 times less risky than Bowhead Specialty. It trades about 0.03 of its potential returns per unit of risk. Bowhead Specialty Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,664 in Bowhead Specialty Holdings on August 30, 2024 and sell it today you would earn a total of 952.00 from holding Bowhead Specialty Holdings or generate 35.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arch Capital Group vs. Bowhead Specialty Holdings
Performance |
| Timeline |
| Arch Capital Group |
| Bowhead Specialty |
Arch Capital and Bowhead Specialty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arch Capital and Bowhead Specialty
The main advantage of trading using opposite Arch Capital and Bowhead Specialty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Capital position performs unexpectedly, Bowhead Specialty 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 Bowhead Specialty will offset losses from the drop in Bowhead Specialty's long position.| Arch Capital vs. Axa Equitable Holdings | Arch Capital vs. American International Group | Arch Capital vs. Old Republic International | Arch Capital vs. Sun Life Financial |
| Bowhead Specialty vs. Axa Equitable Holdings | Bowhead Specialty vs. American International Group | Bowhead Specialty vs. Arch Capital Group | Bowhead Specialty vs. Sun Life Financial |
Check out your portfolio center.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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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