Correlation Between Arch Capital and American Financial
Can any of the company-specific risk be diversified away by investing in both Arch 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 Arch 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 Arch Capital Group and American Financial Group, you can compare the effects of market volatilities on Arch 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 Arch Capital with a short position of American Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and American Financial.
Diversification Opportunities for Arch Capital and American Financial
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arch and American is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial 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 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 Arch Capital i.e., Arch Capital and American Financial go up and down completely randomly.
Pair Corralation between Arch Capital and American Financial
Assuming the 90 days horizon Arch Capital Group is expected to under-perform the American Financial. In addition to that, Arch Capital is 1.45 times more volatile than American Financial Group. It trades about -0.11 of its total potential returns per unit of risk. American Financial Group is currently generating about -0.08 per unit of volatility. If you would invest 2,508 in American Financial Group on August 28, 2024 and sell it today you would lose (47.00) from holding American Financial Group or give up 1.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arch Capital Group vs. American Financial Group
Performance |
| Timeline |
| Arch Capital Group |
| American Financial |
Arch Capital and American Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arch Capital and American Financial
The main advantage of trading using opposite Arch Capital and American Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch 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.| Arch Capital vs. Arch Capital Group | Arch Capital vs. The Allstate | Arch Capital vs. Brighthouse Financial | Arch Capital vs. Athene Holding |
| American Financial vs. American Financial Group | American Financial vs. American Financial Group | American Financial vs. Aegon Funding | American Financial vs. CMS Energy Corp |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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