Correlation Between AmTrust Financial and Employers Holdings
Can any of the company-specific risk be diversified away by investing in both AmTrust Financial and Employers Holdings 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 Employers Holdings 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 Employers Holdings, you can compare the effects of market volatilities on AmTrust Financial and Employers Holdings 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 Employers Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of AmTrust Financial and Employers Holdings.
Diversification Opportunities for AmTrust Financial and Employers Holdings
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AmTrust and Employers is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Employers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Employers Holdings 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 Employers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Employers Holdings has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Employers Holdings go up and down completely randomly.
Pair Corralation between AmTrust Financial and Employers Holdings
Assuming the 90 days horizon AmTrust Financial is expected to generate 1.01 times less return on investment than Employers Holdings. In addition to that, AmTrust Financial is 1.72 times more volatile than Employers Holdings. It trades about 0.05 of its total potential returns per unit of risk. Employers Holdings is currently generating about 0.08 per unit of volatility. If you would invest 3,767 in Employers Holdings on August 31, 2024 and sell it today you would earn a total of 1,569 from holding Employers Holdings or generate 41.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
AmTrust Financial Services vs. Employers Holdings
Performance |
| Timeline |
| AmTrust Financial |
| Employers Holdings |
AmTrust Financial and Employers Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AmTrust Financial and Employers Holdings
The main advantage of trading using opposite AmTrust Financial and Employers Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AmTrust Financial position performs unexpectedly, Employers Holdings 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 Employers Holdings will offset losses from the drop in Employers Holdings' long position.The idea behind AmTrust Financial Services and Employers Holdings 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.| Employers Holdings vs. ICC Holdings | Employers Holdings vs. AMERISAFE | Employers Holdings vs. NMI Holdings | Employers Holdings vs. Investors Title |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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