Correlation Between Loews Corp and Arch Capital
Can any of the company-specific risk be diversified away by investing in both Loews Corp 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 Loews Corp and Arch Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loews Corp and Arch Capital Group, you can compare the effects of market volatilities on Loews Corp 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 Loews Corp with a short position of Arch Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loews Corp and Arch Capital.
Diversification Opportunities for Loews Corp and Arch Capital
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Loews and Arch is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Loews Corp 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 Loews Corp 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 Loews Corp 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 Loews Corp i.e., Loews Corp and Arch Capital go up and down completely randomly.
Pair Corralation between Loews Corp and Arch Capital
Taking into account the 90-day investment horizon Loews Corp is expected to generate 2.47 times more return on investment than Arch Capital. However, Loews Corp is 2.47 times more volatile than Arch Capital Group. It trades about 0.16 of its potential returns per unit of risk. Arch Capital Group is currently generating about -0.19 per unit of risk. If you would invest 8,094 in Loews Corp on August 24, 2024 and sell it today you would earn a total of 514.00 from holding Loews Corp or generate 6.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Loews Corp vs. Arch Capital Group
Performance |
| Timeline |
| Loews Corp |
| Arch Capital Group |
Loews Corp and Arch Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Loews Corp and Arch Capital
The main advantage of trading using opposite Loews Corp and Arch Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loews Corp 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.| Loews Corp vs. Horace Mann Educators | Loews Corp vs. Global Indemnity PLC | Loews Corp vs. Selective Insurance Group | Loews Corp vs. Kemper |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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