Correlation Between AmTrust Financial and BCB Bancorp

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

Diversification Opportunities for AmTrust Financial and BCB Bancorp

0.5

Correlation Coefficient

AmTrust Financial  BCB Bancorp

Very weak diversification

The 3 months correlation between AmTrust and BCB is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and BCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCB Bancorp 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 BCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCB Bancorp has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and BCB Bancorp go up and down completely randomly.

Pair Corralation between AmTrust Financial and BCB Bancorp

Assuming the 90 days horizon AmTrust Financial Services is expected to generate 1.41 times more return on investment than BCB Bancorp. However, AmTrust Financial is 1.41 times more volatile than BCB Bancorp. It trades about -0.05 of its potential returns per unit of risk. BCB Bancorp is currently generating about -0.25 per unit of risk. If you would invest  1,451  in AmTrust Financial Services on September 24, 2024 and sell it today you would lose (56.00) from holding AmTrust Financial Services or give up 3.86% of portfolio value over 90 days.

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

AmTrust Financial Services  vs.  BCB Bancorp

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. Even with relatively invariable forward indicators, AmTrust Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

BCB Bancorp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BCB Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, BCB Bancorp is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AmTrust Financial and BCB Bancorp

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

The idea behind AmTrust Financial Services and BCB Bancorp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.