Correlation Between Arch Capital and Assicurazioni Generali

Can any of the company-specific risk be diversified away by investing in both Arch Capital and Assicurazioni Generali 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 Assicurazioni Generali 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 Assicurazioni Generali SpA, you can compare the effects of market volatilities on Arch Capital and Assicurazioni Generali 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 Assicurazioni Generali. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Capital and Assicurazioni Generali.

Diversification Opportunities for Arch Capital and Assicurazioni Generali

0.25

Correlation Coefficient

Arch Capital  Assicurazioni Generali

Modest diversification

The 3 months correlation between Arch and Assicurazioni is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Arch Capital Group and Assicurazioni Generali SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assicurazioni Generali 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 Assicurazioni Generali. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assicurazioni Generali has no effect on the direction of Arch Capital i.e., Arch Capital and Assicurazioni Generali go up and down completely randomly.

Pair Corralation between Arch Capital and Assicurazioni Generali

Assuming the 90 days horizon Arch Capital Group is expected to under-perform the Assicurazioni Generali. But the preferred stock apears to be less risky and, when comparing its historical volatility, Arch Capital Group is 2.01 times less risky than Assicurazioni Generali. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Assicurazioni Generali SpA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,377  in Assicurazioni Generali SpA on August 30, 2024 and sell it today you would earn a total of  52.00  from holding Assicurazioni Generali SpA or generate 3.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Arch Capital Group  vs.  Assicurazioni Generali SpA

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. In spite of very healthy essential indicators, Arch Capital is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Assicurazioni Generali

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Assicurazioni Generali SpA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Assicurazioni Generali is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arch Capital and Assicurazioni Generali

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

The idea behind Arch Capital Group and Assicurazioni Generali SpA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.