Correlation Between Arch Capital and International General

Can any of the company-specific risk be diversified away by investing in both Arch Capital and International General 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 Arch Capital and International General into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arch Capital Group and International General Insurance, you can compare the effects of market volatilities on Arch Capital and International General 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 Arch Capital with a short position of International General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and International General.

Diversification Opportunities for Arch Capital and International General

-0.76

Correlation Coefficient

Arch Capital  International General

Pay attention - limited upside

The 3 months correlation between Arch and International is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and International General Insuranc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International General and Arch Capital 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 Arch Capital Group are associated (or correlated) with International General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International General has no effect on the direction of Arch Capital i.e., Arch Capital and International General go up and down completely randomly.

Pair Corralation between Arch Capital and International General

Given the investment horizon of 90 days Arch Capital is expected to generate 11.21 times less return on investment than International General. But when comparing it to its historical volatility, Arch Capital Group is 1.27 times less risky than International General. It trades about 0.03 of its potential returns per unit of risk. International General Insurance is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,239  in International General Insurance on August 30, 2024 and sell it today you would earn a total of  421.00  from holding International General Insurance or generate 18.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Arch Capital Group  vs.  International General Insuranc

Arch Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arch Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Arch Capital is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

International General

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International General Insurance are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, International General exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arch Capital and International General

The main advantage of trading using opposite Arch Capital and International General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Capital position performs unexpectedly, International General 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 International General will offset losses from the drop in International General's long position.

The idea behind Arch Capital Group and International General Insurance 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.