Correlation Between AmTrust Financial and Discover Financial
Can any of the company-specific risk be diversified away by investing in both AmTrust Financial and Discover 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 AmTrust Financial and Discover Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AmTrust Financial Services and Discover Financial Services, you can compare the effects of market volatilities on AmTrust Financial and Discover 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 AmTrust Financial with a short position of Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of AmTrust Financial and Discover Financial.
Diversification Opportunities for AmTrust Financial and Discover Financial
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AmTrust and Discover is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial and AmTrust Financial 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 AmTrust Financial Services are associated (or correlated) with Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Discover Financial go up and down completely randomly.
Pair Corralation between AmTrust Financial and Discover Financial
Assuming the 90 days horizon AmTrust Financial is expected to generate 9.73 times less return on investment than Discover Financial. But when comparing it to its historical volatility, AmTrust Financial Services is 3.7 times less risky than Discover Financial. It trades about 0.09 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 14,254 in Discover Financial Services on August 25, 2024 and sell it today you would earn a total of 3,675 from holding Discover Financial Services or generate 25.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AmTrust Financial Services vs. Discover Financial Services
Performance |
| Timeline |
| AmTrust Financial |
| Discover Financial |
AmTrust Financial and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AmTrust Financial and Discover Financial
The main advantage of trading using opposite AmTrust Financial and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AmTrust Financial position performs unexpectedly, Discover 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 Discover Financial will offset losses from the drop in Discover Financial's long position.| AmTrust Financial vs. Progressive Corp | AmTrust Financial vs. White Mountains Insurance | AmTrust Financial vs. Chubb | AmTrust Financial vs. W R Berkley |
| Discover Financial vs. Ally Financial | Discover Financial vs. Synchrony Financial | Discover Financial vs. Western Union Co | Discover Financial vs. Bread Financial Holdings |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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