Correlation Between Dow Jones and AmTrust Financial
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and AmTrust Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and AmTrust Financial Services, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and AmTrust Financial.
Diversification Opportunities for Dow Jones and AmTrust Financial
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and AmTrust is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and AmTrust Financial go up and down completely randomly.
Pair Corralation between Dow Jones and AmTrust Financial
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.06 times more return on investment than AmTrust Financial. However, Dow Jones is 1.06 times more volatile than AmTrust Financial Services. It trades about 0.27 of its potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.11 per unit of risk. If you would invest 4,238,757 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 247,274 from holding Dow Jones Industrial or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. AmTrust Financial Services
Performance |
| Timeline |
Dow Jones and AmTrust Financial Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
AmTrust Financial Services
Pair trading matchups for AmTrust Financial
Pair Trading with Dow Jones and AmTrust Financial
The main advantage of trading using opposite Dow Jones and AmTrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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