Correlation Between AmTrust Financial and Nomura Holdings

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

Diversification Opportunities for AmTrust Financial and Nomura Holdings

0.71

Correlation Coefficient

AmTrust Financial  Nomura Holdings

Poor diversification

The 3 months correlation between AmTrust and Nomura is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Nomura Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings ADR 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 Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings ADR has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Nomura Holdings go up and down completely randomly.

Pair Corralation between AmTrust Financial and Nomura Holdings

Assuming the 90 days horizon AmTrust Financial is expected to generate 1.65 times less return on investment than Nomura Holdings. In addition to that, AmTrust Financial is 1.33 times more volatile than Nomura Holdings ADR. It trades about 0.03 of its total potential returns per unit of risk. Nomura Holdings ADR is currently generating about 0.06 per unit of volatility. If you would invest  379.00  in Nomura Holdings ADR on September 29, 2024 and sell it today you would earn a total of  207.00  from holding Nomura Holdings ADR or generate 54.62% return on investment over 90 days.

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

AmTrust Financial Services  vs.  Nomura Holdings ADR

AmTrust Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 1 (%) 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.

Nomura Holdings ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Nomura Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AmTrust Financial and Nomura Holdings

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

The idea behind AmTrust Financial Services and Nomura Holdings ADR 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.