Correlation Between AmTrust Financial and PICC Property

Can any of the company-specific risk be diversified away by investing in both AmTrust Financial and PICC Property 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 AmTrust Financial and PICC Property into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AmTrust Financial Services and PICC Property and, you can compare the effects of market volatilities on AmTrust Financial and PICC Property 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 AmTrust Financial with a short position of PICC Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of AmTrust Financial and PICC Property.

Diversification Opportunities for AmTrust Financial and PICC Property

0.35

Correlation Coefficient

AmTrust Financial  PICC Property

Weak diversification

The 3 months correlation between AmTrust and PICC is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and PICC Property and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PICC Property and AmTrust Financial 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 AmTrust Financial Services are associated (or correlated) with PICC Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PICC Property has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and PICC Property go up and down completely randomly.

Pair Corralation between AmTrust Financial and PICC Property

Assuming the 90 days horizon AmTrust Financial is expected to generate 9.65 times less return on investment than PICC Property. But when comparing it to its historical volatility, AmTrust Financial Services is 2.12 times less risky than PICC Property. It trades about 0.03 of its potential returns per unit of risk. PICC Property and is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,175  in PICC Property and on September 12, 2024 and sell it today you would earn a total of  1,165  from holding PICC Property and or generate 36.69% return on investment over 90 days.

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

AmTrust Financial Services  vs.  PICC Property and

AmTrust Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, AmTrust Financial is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

PICC Property

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PICC Property and are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, PICC Property showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AmTrust Financial and PICC Property

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

The idea behind AmTrust Financial Services and PICC Property and 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.

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.