Correlation Between AmTrust Financial and Summit Midstream

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

Diversification Opportunities for AmTrust Financial and Summit Midstream

0.33

Correlation Coefficient

AmTrust Financial  Summit Midstream

Weak diversification

The 3 months correlation between AmTrust and Summit is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream 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 Summit Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Midstream has no effect on the direction of AmTrust Financial i.e., AmTrust Financial and Summit Midstream go up and down completely randomly.

Pair Corralation between AmTrust Financial and Summit Midstream

Assuming the 90 days horizon AmTrust Financial Services is expected to generate 2.75 times more return on investment than Summit Midstream. However, AmTrust Financial is 2.75 times more volatile than Summit Midstream. It trades about -0.06 of its potential returns per unit of risk. Summit Midstream is currently generating about -0.25 per unit of risk. If you would invest  1,451  in AmTrust Financial Services on September 26, 2024 and sell it today you would lose (66.00) from holding AmTrust Financial Services or give up 4.55% of portfolio value over 90 days.

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

AmTrust Financial Services  vs.  Summit Midstream

AmTrust Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AmTrust Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Summit Midstream

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Summit Midstream is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AmTrust Financial and Summit Midstream

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

The idea behind AmTrust Financial Services and Summit Midstream 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.