Correlation Between Chubb and AmTrust Financial
Can any of the company-specific risk be diversified away by investing in both Chubb and AmTrust 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 Chubb and AmTrust Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chubb and AmTrust Financial Services, you can compare the effects of market volatilities on Chubb and AmTrust 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 Chubb with a short position of AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chubb and AmTrust Financial.
Diversification Opportunities for Chubb and AmTrust Financial
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Chubb and AmTrust is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial and Chubb 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 Chubb are associated (or correlated) with AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of Chubb i.e., Chubb and AmTrust Financial go up and down completely randomly.
Pair Corralation between Chubb and AmTrust Financial
Allowing for the 90-day total investment horizon Chubb is expected to under-perform the AmTrust Financial. But the stock apears to be less risky and, when comparing its historical volatility, Chubb is 1.59 times less risky than AmTrust Financial. The stock trades about -0.02 of its potential returns per unit of risk. The AmTrust Financial Services is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,430 in AmTrust Financial Services on August 29, 2024 and sell it today you would earn a total of 80.00 from holding AmTrust Financial Services or generate 5.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chubb vs. AmTrust Financial Services
Performance |
| Timeline |
| Chubb |
| AmTrust Financial |
Chubb and AmTrust Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chubb and AmTrust Financial
The main advantage of trading using opposite Chubb and AmTrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chubb position performs unexpectedly, AmTrust 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 AmTrust Financial will offset losses from the drop in AmTrust Financial's long position.| Chubb vs. Cincinnati Financial | Chubb vs. Aflac Incorporated | Chubb vs. Dover | Chubb vs. Franklin Resources |
| AmTrust Financial vs. Progressive Corp | AmTrust Financial vs. White Mountains Insurance | AmTrust Financial vs. Chubb | AmTrust Financial vs. W R Berkley |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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