Correlation Between Arch Capital and American International
Can any of the company-specific risk be diversified away by investing in both Arch Capital and American International 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 International 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 International Group, you can compare the effects of market volatilities on Arch Capital and American International 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 International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and American International.
Diversification Opportunities for Arch Capital and American International
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Arch and American is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International 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 International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Arch Capital i.e., Arch Capital and American International go up and down completely randomly.
Pair Corralation between Arch Capital and American International
Assuming the 90 days horizon Arch Capital is expected to generate 1.78 times less return on investment than American International. But when comparing it to its historical volatility, Arch Capital Group is 1.65 times less risky than American International. It trades about 0.03 of its potential returns per unit of risk. American International Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,201 in American International Group on August 28, 2024 and sell it today you would earn a total of 1,394 from holding American International Group or generate 22.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arch Capital Group vs. American International Group
Performance |
| Timeline |
| Arch Capital Group |
| American International |
Arch Capital and American International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arch Capital and American International
The main advantage of trading using opposite Arch Capital and American International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Capital position performs unexpectedly, American International 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 International will offset losses from the drop in American International's long position.| Arch Capital vs. Athene Holding | Arch Capital vs. The Hartford Financial | Arch Capital vs. Arch Capital Group | Arch Capital vs. Athene Holding |
| American International vs. Axa Equitable Holdings | American International vs. Arch Capital Group | American International vs. Old Republic International | American International 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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