Correlation Between PG E and Arch Capital

Can any of the company-specific risk be diversified away by investing in both PG E and Arch Capital 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 PG E and Arch Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PG E P6 and Arch Capital Group, you can compare the effects of market volatilities on PG E and Arch Capital 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 PG E with a short position of Arch Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of PG E and Arch Capital.

Diversification Opportunities for PG E and Arch Capital

-0.44

Correlation Coefficient

PG E  Arch Capital

Very good diversification

The 3 months correlation between PCG6 and Arch is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding PG E P6 and Arch Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Capital Group and PG E 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 PG E P6 are associated (or correlated) with Arch Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Capital Group has no effect on the direction of PG E i.e., PG E and Arch Capital go up and down completely randomly.

Pair Corralation between PG E and Arch Capital

Assuming the 90 days trading horizon PG E is expected to generate 1.41 times less return on investment than Arch Capital. But when comparing it to its historical volatility, PG E P6 is 1.41 times less risky than Arch Capital. It trades about 0.05 of its potential returns per unit of risk. Arch Capital Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,327  in Arch Capital Group on September 30, 2024 and sell it today you would earn a total of  633.00  from holding Arch Capital Group or generate 7.6% return on investment over 90 days.

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

PG E P6  vs.  Arch Capital Group

PG E P6

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PG E P6 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, PG E is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite nearly stable basic indicators, Arch Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PG E and Arch Capital

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

The idea behind PG E P6 and Arch Capital Group 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.