Correlation Between CHS and Arch Capital
Can any of the company-specific risk be diversified away by investing in both CHS and Arch Capital 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 CHS and Arch Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHS Inc Pref and Arch Capital Group, you can compare the effects of market volatilities on CHS and Arch Capital 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 CHS with a short position of Arch Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHS and Arch Capital.
Diversification Opportunities for CHS and Arch Capital
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CHS and Arch is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CHS Inc Pref and Arch Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Capital Group and CHS 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 CHS Inc Pref are associated (or correlated) with Arch Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Capital Group has no effect on the direction of CHS i.e., CHS and Arch Capital go up and down completely randomly.
Pair Corralation between CHS and Arch Capital
Assuming the 90 days horizon CHS is expected to generate 3.27 times less return on investment than Arch Capital. But when comparing it to its historical volatility, CHS Inc Pref is 1.14 times less risky than Arch Capital. It trades about 0.02 of its potential returns per unit of risk. Arch Capital Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,203 in Arch Capital Group on September 2, 2024 and sell it today you would earn a total of 98.00 from holding Arch Capital Group or generate 4.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHS Inc Pref vs. Arch Capital Group
Performance |
| Timeline |
| CHS Inc Pref |
| Arch Capital Group |
CHS and Arch Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHS and Arch Capital
The main advantage of trading using opposite CHS and Arch Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHS position performs unexpectedly, Arch Capital 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 Arch Capital will offset losses from the drop in Arch Capital's long position.The idea behind CHS Inc Pref and Arch Capital Group 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.| Arch Capital vs. Athene Holding | Arch Capital vs. The Hartford Financial | Arch Capital vs. Arch Capital Group | Arch Capital vs. Athene Holding |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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