Correlation Between AmTrust Financial and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both AmTrust Financial and Pentair PLC 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 Pentair PLC 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 Pentair PLC, you can compare the effects of market volatilities on AmTrust Financial and Pentair PLC 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 Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of AmTrust Financial and Pentair PLC.
Diversification Opportunities for AmTrust Financial and Pentair PLC
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AmTrust and Pentair is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Pentair PLC go up and down completely randomly.
Pair Corralation between AmTrust Financial and Pentair PLC
Assuming the 90 days horizon AmTrust Financial Services is expected to under-perform the Pentair PLC. In addition to that, AmTrust Financial is 1.53 times more volatile than Pentair PLC. It trades about -0.07 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.4 per unit of volatility. If you would invest 9,965 in Pentair PLC on September 5, 2024 and sell it today you would earn a total of 918.00 from holding Pentair PLC or generate 9.21% 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. Pentair PLC
Performance |
| Timeline |
| AmTrust Financial |
| Pentair PLC |
AmTrust Financial and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AmTrust Financial and Pentair PLC
The main advantage of trading using opposite AmTrust Financial and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AmTrust Financial position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC's long position.| AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services | AmTrust Financial vs. AmTrust Financial Services |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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