Correlation Between Enstar Group and Arch Capital
Can any of the company-specific risk be diversified away by investing in both Enstar Group 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 Enstar Group and Arch Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enstar Group Limited and Arch Capital Group, you can compare the effects of market volatilities on Enstar Group 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 Enstar Group with a short position of Arch Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enstar Group and Arch Capital.
Diversification Opportunities for Enstar Group and Arch Capital
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Enstar and Arch is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Enstar Group Limited 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 Enstar Group 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 Enstar Group Limited 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 Enstar Group i.e., Enstar Group and Arch Capital go up and down completely randomly.
Pair Corralation between Enstar Group and Arch Capital
Given the investment horizon of 90 days Enstar Group Limited is expected to generate 0.29 times more return on investment than Arch Capital. However, Enstar Group Limited is 3.45 times less risky than Arch Capital. It trades about 0.0 of its potential returns per unit of risk. Arch Capital Group is currently generating about -0.15 per unit of risk. If you would invest 32,538 in Enstar Group Limited on August 30, 2024 and sell it today you would lose (3.00) from holding Enstar Group Limited or give up 0.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enstar Group Limited vs. Arch Capital Group
Performance |
| Timeline |
| Enstar Group Limited |
| Arch Capital Group |
Enstar Group and Arch Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enstar Group and Arch Capital
The main advantage of trading using opposite Enstar Group and Arch Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enstar Group 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.| Enstar Group vs. Global Indemnity PLC | Enstar Group vs. Erie Indemnity | Enstar Group vs. AMERISAFE | Enstar Group vs. Diamond Hill Investment |
| Arch Capital vs. Arch Capital Group | Arch Capital vs. The Allstate | Arch Capital vs. Brighthouse Financial | 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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